Prepare a cash budget (using info from the Sales Budget and purchases budget shown below) for January through March and for the first quarter in total. The company maintains a minimum cash balance of $50,000.00, and this was the balance in the cash account on January 1. Past experience shows that 30% of sales are collected in the month of the sale, and 70% in the month following the sale. Labor cost is $15 per unit. Other expenses include $37,000 per month for rent, $4,000 for advertising, and $6,000 per month for depreciation. All costs are paid in the current month except inventory purchases, which are paid in the month following purchase (i.e. January purchases are paid in February). On January 1^st there was an accounts receivable balance of $60,000 and an outstanding accounts payable balance of $100,000. The company has an open line of credit with a bank and can borrow at an annual rate of 12%. For simplification assume that all loans are made at the beginning of the month when borrowing is needed and repayments are made at the end of a month when there is enough cash to make the payment. Also, interest is only paid at the time when a repayment is made. Additionally, all loans and repayments (not the interest portion) can only be made in increments of $1000 and the company would like to pay its debts, or a portion thereof, as soon as it has enough cash to do so.

SALES BUDGET

Month	December	January	February	March	April
Budgeted Unit Sales	$40,000	$90,000	$80,000	$70,000	$40,000
Selling Price Per Unit	$40	$40	$40	$40	$40
Sales Revenue	$160,000	$360,000	$320,000	$280,000	$160,000

PURCHASES BUDGET

Month	January	February	March
Sales (Units)	40,000	90,000	80,000
Ending Inventory	45,000	40,000	20,000
Beginning Inventory	-20000	-45000	-40000
Budgeted Purchases (Units)	65000	85000	60000
Price Per Unit	$15	$15	$15
Budgeted Purchases ($)	$975,000	$1,275,000	$900,000