SALES SHOULD BE REPLACED AS FOLLOWS: JANUARY - $400,000 FEBRUARY - $600,000 MARCH - $800,000 ALL OTHER INFORMATION STAYS THE SAME.

The controller of Shoe Mart Inc. asks you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: January February March Sales $450,000 $550,000 $700,000 Manufacturing costs 330,000 260,000 420,000 Selling and administrative expenses 150,000 100,000 140,000 Capital expenditures 45,000 The company expects to sell about 20% of its merchandise for cash. Of sales on account, 75% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property tax expense represent $40,000 of the estimated monthly manufacturing costs. The annual insurance premium i paid in June and the annual property taxes are paid in October. Of the remainder of the manufacturing costs, 90% are expected to be paid in the month in which they are incurred and the balance in the following month. All sales and administrative expenses are paid in the month incurred Current assets as of January 1 include cash of $45,000, marketable securities of $65,000, and accounts receivable of $290,000 ($240,000 from December sales and $50,000 from November sales). Sales on account in November and December were $200,000 and $240,000, respectively Current liabilities as of January 1 include a $50,000, 8%, 90-day note payable due March 20 and $18,000 of accounts payable incurred in December for manufacturing c All selling and administrative expenses a paid in cash in the period they are incurred. It is expected that $20,000 in dividends will be received in January. An estimated income tax payment of $15,000 will be made in February. Shoe Mart's regular quarterly dividend of $5,000 is expecte to be declared in February and paid in March. Management desires to maintain a minimum cash balance of 835,000 Instructions i. Prepare a monthly cash budget and supporting schedules for January, February, and March 2. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller