Question
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
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.
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