May June July

Sales 86000 90000 95000

Manufacturing Costs 34000 39000 44000

Selling and Admin Expenses 15000 16000 22000

Captial Expenditures 80000

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month folllowing the sale and the remainder the following month (second month following sale)

Of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month . Current Liabilites as of May 1 include $6,000 of accounts payable incurred in April for Manufacturing costs

All Selling and administrative expenses are paid in cash in the period they are incurred. AN estimated income tax payment of $14,000 will be made in June. Sonoma's regular qrtly dividend of $5,000 is expected to be declared in June and paid in July.

Instructions

1. Prepare a monthly cash budget and supporting schedules for May June and July 2016

2. Management desires to maintain a minimum cash balance of $30,000. On the basis of the cash budget prepared in part 1 what recommendation should be made to the controller?