Problems

3-1

It is January and the XYZ Company wishes to prepare a monthly cash forecast over the next four moths. Sales for December were $1,100,000.

Expected sales for the next four months are:

January : $600.000

February: $800.000

March: $1.100.000

April $800.000

30% of the firm's sales are for cash: the remainder are collected in the month following the sale (there are no bad debts). Disbursements consists of payments for raw materials, direct labor, other operating expenses, purchases of fixed assets, and taxes. Cost of sales are 75% of sales. Of these cost of sales 38% are raw material costs and 62% are direct labor costs. Direct labor costs are paid in the month incurred, while raw materials are purchased on net 30-day terms. Other operatig expenses total $150,000 pe month. Expenditures for fixed assets of $75,000 are to be made in February and April, and tax payments of $110,000 are to be made in January, March. As of Januray 1, there are no surpluses or deficits and the firm's cash balance is $83,000. The firm keeps a cash balance equal to 10% of the month's cost of sales. Generate a monthly cash forecast for the upcoming four months.

3-2

A firms makes monthly cash forecasts and distributes these forecast