Kylie Marrivale owns and operates her own cleaning industrial cleaning business in New York, New York. On November 1, 20202 she was called by her bank manager and informed that the bank will be implementing new credit restrictions rules and procedures as of January 1, 2021. She has been asked to prepare an estimate of her financial requirements for the next 12 months. Specifically, her bank manager has requested a cash budget to be prepared for the period December 1, 2020 to November 30, 2021.

Jane has contacted all her department managers to request the necessary information required and has received back the following information:

Commercial Sales Department (Revenue from Cleaning Contracts):

November 2020 $90,000

December 2020 $90,000

January 2021 $135,000

February 2021 $130,000

March 2021 $130,000

April 2021 $125,000

May 2021 $120,000

June2021 $ 80,000

July 2021 $ 80,000

August 2021 $ 70,000

September 2021 $ 70,000

October 2021 $100,000

November 2021 $100,000

The Accounts Receivables Department provides the following Information:

15% of sales are on a cash basis

60% of sales are collected after 30 days

25% of sales are collected after 60 days

The Accounts Payable Department provides the following information:

Cost of sales, which is 50% of sales, is incurred in the month in which the sales (cleaning contracts) take place. These goods are paid for 30 days after the purchases are made (ie: the next month).

Monthly selling and administrative expenses are as follows:

Salaries $40,000

Telephone $ 1,000

Depreciation $ 500

Rent $ 2,000

Hydro $ 1,100

Office Supplies $ 1,000

Gas/Vehicle Expense $ 2,000

Other Anticipated Expenses are as follows:

• Taxes: $20,000 to be paid in April
• Purchase of new equipment: $3,500 in each of the months of March, June & September

The cash balance (Beginning Bank Balance) on December 1, 2020 is $12,000

Note: Kylie feels it is necessary to keep a minimum cash balance of $5,000 in the companys bank account at all times.

Kylie has asked you to provide her with the following information to take to her meeting with her bank manager this afternoon:

1. Cash budget for the period December 1, 2020 November 30, 2021
2. What, if any, will be the maximum amount required for an operating line of credit? What month(s) will this line of credit most likely be required for?