Pedros Pizza makes frozen pizza dough. Thecompany just finished its first year of operation (12 months, Jan-Dec). The following is its traditional income statement and Balance Sheet

Sales (15,000 units) $ 300,000

CGS 180,000

Gross Profit $ 120,000

Sales Commissions $30,000

Salaries 30,000

Depreciation expense 6,000

Net Income $54,000

Cash $5,000 AP $3,000

AR 5,000 Credit Line 7,000

Inventory Raw Mat 9,000

Inventory Finished Goods 3,000 Common Stock 12,000

Equipment60,000 Retained Earn 54,000

Acc Depreciation ( 6,000)

Total Assets $76,000 Total L & Eq $76,000

VCP wants to prepare a cash budget for the first 3 months of the next year.

Use the following estimates:

- The quantity sold is projected to increase 4% for the year. Price will increase 5%. Sales are spread evenly throughout the year. CGS should be calculated on a FIFO basis.

- 25% of sales is collected in the month of sale; the remainder is collected the next month.

- Inventory:

o Last years Finished Goods and Cost of Goods Sold had a constant cost per unit.

o All raw materials is purchased on credit ($1.50per lb) and is the same price as last year. Each product requires 2.5 lbs).

o Ending inventory for both should be 40% of next months activity (activity is constant).

o Beginning and ending WIP is zero

- 20% of purchases are paid in the month of purchase, 80% in the following. All other expenses are paid with cash.

- Direct Labor is 0.2 hours per product at $30 per hour. Variable Overhead is $2.25 per product. Fixed Overhead is zero.

- The credit line is used for cash shortfalls. Excess cash will pay down this line. Interest is 1% per month of last months balance.

- Projections are to buy $6000 of new equipment at the end of January. Equipment is depreciated straight-line to zero salvage over 5 years. All of this is used in administration.

- Sales commission rate will remain the same. Salaries will increase by 4%.

- VCP wants to maintain a minimum cash balance of at least $5,000. Excess to repay credit

Preliminary:
Price	21
Cost per unit	12
a. Sales A/R Collections
	Jan	Feb	Mar
New Price	21
Sales (units)	1,300	1,300	1,300
Sales ($s)	27,300	27,300	27,300
AR Beg Bal	5,000	20,475	20,475
Sales ($s)	27,300	27,300	27,300
Collections	11,825	27,300	27,300
AR End Balance	20,475	20,475	20,475
b. Finished Goods/Production
	Jan	Feb	Mar
Beginning Unit Cost	12
Beginning Finished Goods (units)	250	520	520
Sales (units)	1,300	1,300	1,300
Minimum Required Inventory (units)	520	520	520
Production (units)	1,570	1,300	1,300
Ending Inventory	520	520	520
c. Inventory/Purchases
	Jan	Feb	Mar
Beginning RM Balance (units)	6,000	2,075	1,300
RM Needed for production	3,925	3,250	3,250
Minimum Required Inventory (units)	1,300	1,300	1,300
Purchases (units)		2,475	3,250
				Purchases ($)		3,713	4,875
Actual Ending Inventory Balance (units)	2,075	1,300	1,300
Ending Balance ($s)	3,113	1,950	1,950
d. Capital
	Jan	Feb	Mar
Acquisitions	6,000
Equipment	66,000	66,000	66,000
Depreciation	600	600	600
Acc dep End Balance	6,600	7,200	7,800
e. Production Costs
	Jan	Feb	Mar
Direct materials use (units)	3,925	3,250	3,250
Direct materials ($)	5,887.50	4,875	4,875
Direct labor	9,420	7,800	7,800
Variable Overhead	3,532.50	2,925	2,925
Fixed Overhead	0	0	0
Depreciation	600	600	600
Total Production Costs	18,840	15,600	15,600
Cost per Unit	12	12	12
f. Cost of Goods Sold
Beg FG (units)	250	520	520
Cost per unit of beg FG	12.00	12.00	12.00
Qty produced	1,570	1,300	1,300
Unit cost of units produced	12.00	12.00	12.00
quantity sold	1,300	1,300	1,300
CGS	15,600	15,600	15,600
Units in Ending	520	520	520
Cost of ending	6,240	6,240	6,240
f. AP/Cash Payments
	Jan	Feb	Mar
AP Beg Bal	3,000	0	2,970
Purchases ($s)	0	3,712.50	4,875
AP Payments	3,000	742.50	3,945
AP End Balance	0	2,970	3,900
g. Cash Budget/Interest/Credit line (20 points)
	Jan	Feb	Mar
Cash Beg Bal	5,000	5000	5000
Collections	11,825	27,300	27,300
AP Payments	(3,000)	(743)	(3,945)
				Other Cash Payments:
DL	(9,420)	(7,800)	(7,800)
VOH	(3,532.50)	(2,925)	(2,925)
FOH	0	0	0
Sales Commissions	(2,730)	(2,730)	(2,730)
Sales Salaries	(2,600)	(2,600)	(2,600)
Acquisistions	(6,000)	(6,000)	(6,000)
Interest Expense	(70)	(225.28)	(183)
Cash subtotal	(10,528)	9,277.23	6,117
Credit Line Beginning balance	7,000	22,528	18,250
Borrowing/(Repayment) of credit line	15,528	(4,277.23)	(1,117.50)
Credit Line Ending balance	22,528	18,250	17,133
Cash ending balance	5,000	5,000	5,000

j. Projected monthly Income statement for Jan, Feb, Mar

** Can you check where I made mistakes. Please.