ro SECTION B Answer Either Question 2 or 3 z arown's Tech. Company provides database management services. It uses the state of the art equipment and employs five information specialists. Each specialist works an average of 160 hours a month. Brown's Tech controller has compiled the following information: Actual Data for 2006 Forecasted Data for 2007 November $ December $ January $ February March S fClients Billing (Sales) Selling & administrative expenses 12,000 Operating Supplies Processing overhead 25,000 35,000 25,000 20,000 12,000 11,000 2,500 2,500 3,000 2,500 40,000 13,000 12,500 4,000 3,500 of 2,500 3,200 3,500 60% of the clients billings are cash sales collected during the month of sale, 30% are collected in the first month following the sale, and 10% are collected in the second month following the sale. Operating supplies are paid for in the month of purchase 1. 2. 3. Seling and administrative expenses and processing overheads are paid in the month following the cost's incurrence The company has a bank loan of $12,000 at a 12% annual interest rate. Interest is paid monthly and $2,000 of the loan principal is due on February 28, 2007. 4. 5. Income taxes of $4,550 for the calendar year 2006 are due and payable on March 15, 2007 6. The information specialists earn $8.50 an hour and all payroll- related employee benefit costs 7. 8. are included in processing overhead. The company anticipates no capital expenditures for the first quarter of the upcoming year. It expects its cash balance on December 31, 2006 to be $13,840 Required a) b) c) Prepare a cash collection schedule Prepare a monthly cash budget for the three month period ended March 31,2007. Comment on whether the ending cash balances are adequate for Brown's Tech. cash needs. (30 marks)