Question
Prepare a cash budget for atlas products inc., for the first quarter of 2017, based on the following information: The budgeting section of the corporate
Prepare a cash budget for atlas products inc., for the first quarter of 2017, based on the following information:
The budgeting section of the corporate fianc department of Atlas Products has received the following sales estimates from the marketing department:
Total Sales | Credit Sales | |
Dec 2016 | $825,000 | $770,000 |
Jan 2017 | $730,000 | $690,000 |
Feb 2017 | $840,000 | $780,000 |
Mar 2017 | $920,000 | $855,000 |
The company has found that, on avg, about 25% of its credit sales are collected during the month when the sales is made, and the remaining 75% of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting.
The company estimates its purchases at 60% of the next months sales, and payment for those purchases are budgeted to lag the purchases by one month.
Various disbursements have been estimated as follows:
January | February | March | |
Wages and Salaries | $250,000 | $290,000 | $290,000 |
Rent | $27,000 | $27,000 | $27,000 |
Other expeses | $10,000 | $12,000 | $14,000 |
In addition, a tax payment of $105,000 is due Jan 15th, and $40,000 in dividends will be declared in Jan and paid in March. Also, the company has ordered a $75,000 piece of equipment. Delivery is scheduled for early Jan, and payment will be due in Feb.
The companys projected cash balance at the beginning of January is $100,000 and the company desires to maintain a balance of $100,000 at the end of each month.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started