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Question:

The controller of Sonoma Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:

Table

$|$ June $|$ July $|$ August $|$

Sales$|$ $$86,000|$ $$90,000|$ $$95,000$Manufacturing cost$|34,000|39,000|44,000$Selling and administrative cost $15,000|16,000|22,000$

Capital expenditure$|-|-|80,000$

The company expects to sell about $10\%$ of its merchandise for cash. Of sales on account$/$credit $70\%$ are expected to be collected in the month following the sale and the remainder of the following month $($second month following sale$).$Depreciation, insurance and property tax expense represent $$3,500$ of estimated monthly manufacturing cost. The annual insurance premium paid in October, and the annual property taxes are paid in December. Of the remainder of the manufacturing cost, $80\%$ are expected to be paid in the month in which they are incurred in the balance in the following month.

Current assets of June $1$ include cash of $$33,000$ marketable securities of $$40,000$ and accounts receivable of $$90,000($$$72,000$ from May sales in $$18,000$ from April sales$).$Sales on account$/$credit for April and May were $$60,000$ and $$72,000$ respectively. current liabilities as of June $1$ include $$6000$ of accounts payable incurred in May for manufacturing cost. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $$14,000$ will be made in July. Samoa's regular quarterly dividend of $$5,000$ is expected to be declared in July and paid in August. Management wants to maintain a minimum cash balance of $$30,000.$

Requirements

$1.$Prepare Auntie cash budget and supporting schedules for June, July and August $2024$

$2.$ On the basis of the cash budget prepared in part one above what recommendation should be made to the controller

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