Prepare a cash budget for Hula Island on a monthly basis for the period June 2014 through May 2015. Perform the calculations on an incremental basis (i.e., determine the increase or decrease in cash for each month). The following information will allow you to structure the cash budget: The cash coming in each month is approximately one-half of the current months sales and one-half of the previous months sales. The cash out for each month has several parts. Each month Hula pays cash for invoices approximately equal to the cost of products sold in the prior month. Rent of $2,000 is a fixed cost paid during the same month it is incurred. Variable costs are paid each month. They consist of part-time labor costs that average $1.25 per order and shipping and taxes that average $4.10 per order. Finally, the owner takes $2,000 a month as a personal distribution.

Hula is a small business with approximately $300,000 in annual sales and roughly $48,000 in annual profits.

Table 1: Hula Island Income StatementEntire Year Ended May 2015 Unit Sales 13,926 Revenues $292,446 Less: Rent 24,000 COGS 146,227 Labor 17,408 Shipping and Taxes 57,097 Profits $47,714 Average profit/order $3.43

Hula Island Income StatementBy Month June* July Aug Sept Oct Nov Dec Jan Feb Mar Apr May Unit Sales 731 981 973 1,301 959 1,245 2,359 1,700 850 769 1,218 840 Revenues 15,351 $20,601 $20,433 $27,321 $20,139 $26,145 $49,539 $35,700 $17,850 $16,149 $25,578 17,640 Less: Rent 2,000 2,000 2000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

COGS 7,676 10,301 10,217 13,661 10,070 13,073 24,770 17,850 8,925 8,075 12,789 8,820

Labor 914 1,226 1,216 1,626 1,199 1,556 2,949 2,125 1,063 961 1,523 1,050

Ship/Taxes 2,997 4,022 3,989 5,334 3,932 5,105 9,672 6,970 3,485 3,153 4,994 3,444

Profits $1,764 $3,052 $3,011 $4,700 $2,938 $4,411 $10,148 $6,755 $2,377 $1,960 $4,272 $2,326

*The previous months sales (May sales) were $17,010.