Question 1: - Cash Budget:

Your friend, Susy Snipps, has been running a successful hair salon for the last couple of years. She has asked you to put together a cash budget. Her regular accountant was too busy to help, but told Susy her depreciation expense was going to be $5,400 per year, using the straight-line method. She has supplied you with the following information to help you put together her cash budget. The following are the estimated number and type of haircuts she will do per month.

	May	June	July	August	September
Regular Cut	35	40	55	45	90
Perms	20	5	10	25	10
Cut and Dye	50	90	60	115	50

The revenue for a regular cut is $45/ cut. Perms are $200/ perm and a cut and dye brings in $325 each. Susy has a deal with a movie production company and half of the cut and dye jobs that she does are on account, the other half pay on the date of the service. The movie production company pays for the cut and dye the month after it is done. Perms and Regular cuts all pay right away. ` tgt

Material and Labour information Susy has provided:

	Regular cut	Perms	Cut and Dye
Labour hours	0.5	3	4
Chemical Packs needed	-	1	3
Cost of Chemical Pack	-	$ 25	$ 30

Perms and cut and dye jobs require some chemical packs to complete the job (see amounts above) as well as the estimated time it takes (labour hours, paid at $30/ hour ) to complete the job. The chemical packs for perms can be purchased the day of the job, so there is no beginning or ending inventory. Cut and dye jobs, however, require a different chemical pack and Susy made the decision to have additional inventory on hand. She requires 20% of next months total cut and dye to be factored into the total chemical packs needed for cut and dye jobs. The beginning inventory, May 1, was zero. Perm packs are paid 100% in the month they are used. Cut and Dye packs are purchased on account and are paid the month after the service has been completed.

Other information Susy has provided:

	June	July	August	September
Rent	1,000	1,000	1,000	1,000
Dividend	3,000	8,000	7,000	15,000
Office and Admin	3,500	3,500	3,500	3,500

NOTE: Susy requires a minimum bank balance of $4,000 at the end of the month and the ending May bank balance is $5,000. Susy has access to a line of credit of $500,000 at an interest rate of 20%. Borrowings are made at the beginning of the month and repayments are made at the end of the month.

REQUIRED:

Using the Excel file included with the exam, for the month of June, July and August prepare

• Sales Budget, with a cash receipts.
  • What is the A/R at the end of the month?
• Materials Budget, with cash disbursements.
  • What is the A/P at the end of the month?
• Direct Labour Budget
• Cash budget