Question
Jumobtron Inc. had monthly sales of $1.2 million in November, $1.4 million in December, and $800,000 in January. It projects monthly sales of $1.0 million
Jumobtron Inc. had monthly sales of $1.2 million in November, $1.4 million in December, and $800,000 in January. It projects monthly sales of $1.0 million for February, $1.2 million for March, and $900,000 for April, respectively. The firm purchases raw materials two months ahead of the sales at 60% of the corresponding monthly sales. The firm pays off its purchases in the following month. The firm collects 35% of its sales in the same month and 63% of its previous months sales. The firms other expenses such as wages and rent, which are due every month, equal to 30% of the monthly sales. Both sales and purchases are on credit. The firm carries a cash balance of $220,000 in its bank account, which imposes a compensating balance requirement of $200,000, at the end of January. The monthly interest rate on short-term borrowing is 1%, and the interest is due in the following month.
Prepare a monthly cash budget for the months of February and March. Make sure that you include the beginning and ending cash balances, cash collections and disbursements, and cumulative cash surplus or borrowing (deficit) for EACH of the two months!
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