Section 3Cash Budgeting: (26 points)

Use the following information and the sales data provided on the ICE Co. Sales Data tab to prepare a cash budget for ICE Co. for the six months from July - December

• All sales are on credit
  • Terms are 2/10 Net 30
  • 20% of customers pay during the month of the sale and take the discount
  • 50% of customers pay 30 days after the sale
  • 30% of customers pay 60 days after the sale
• Materials are purchased on credit one month in advance of sale. Payment is due 30 days from purchase. Material cost is 55% of sales.
• Labor cost is 20% of sales, and is paid approximately one month before products are sold.
• Other selling and misc. expenses are 5% of sales for the current month
• Rent of $9,000 is due monthly
• Property taxes are due in July totaling $10,000
• ICE expects to purchase a new piece of equipment in September for $16,000
  • The equipment will be depreciated straight line over three years
• ICEs policy is to keep a minimum of $5,000 cash on hand
• Cash on hand on June 30 is $8,000

ICE believes that with more hands on management of his accounts receivable, he can improve his collections such that 35% of his customers take the discount, 60% pay within thirty days, and the remaining 5% pay within 60 days. If he is able to do this without negatively impacting his sales, by how much can he reduce his maximum cash deficit?

	May	June	July	August	September	October	November	December	January	February
Sales	$ 60,000	$ 105,000	$ 145,000	$ 155,000	$ 225,000	$ 170,000	$ 125,000	$ 125,000	$ 90,000	$ 60,000