JS has decided to purchase t-shirts and print them with a logo to commemorate a major international sporting event.

Sales

The commemorative t-shirts will be sold for $10 each and predicted sales are as follows:

July 9,000 t-shirts

August 18,000 t-shirts

September 22,500 t-shirts

One third of sales will be for cash. The remainder will be on credit with the customer paying the month after sale.

Purchases

The t-shirts will cost $6 each and will be purchased in the month prior to sale. It is expected that 10% of the t-shirts purchased will be damaged during the printing process and will not be suitable for sale. The supplier has offered two months credit.

Capital investment

To print the t-shirts with the logo of the sporting event will require the purchase of a machine costing $30,000. The machine will be bought at the start of the project and paid for in August. The machine will have a five-year useful life but no expected residual value. The machine will be used elsewhere in the business at the end of this project.

Expenses

Expenses, excluding advertising, of $20,000 per month will be incurred each month and paid in the month incurred. Advertising costs of $5,000 per month will be incurred in each of the months July, August and September and will be paid one month in arrears.

Required:

Produce a cash budget for the project for each of the three months July, August and September.