Start with the partial model in the file attached. Marvel Pence, CEO of Marvels Renovations, a custom building and repair company, is preparing documentation for a line of credit request from his commercial banker. Among the required documents is a detailed sales forecast for parts of 2020 and 2021:

	Sales	Labor and Raw Materials
May, 2020	$75,000	$80,000
June, 2020	$115,000	$75,000
July, 2020	$145,000	$105,000
August, 2020	$125,000	$85,000
September, 2020	$120,000	$65,000
October, 2020	$95,000	$70,000
November, 2020	$75,000	$30,000
December, 2020	$55,000	$35,000
January, 2021	$45,000	N/A

Estimates obtained from the credit and collection department are as follows: collections within the month of sale, 20%; collections during the month following the sale, 60%; collections the second month following the sale, 25%. Payments for labor and raw materials are typically made during the month following the one in which these costs were incurred. Total costs for labor and raw materials are estimated for each month as shown in the table. General and administrative salaries will amount to approximately $25,000 a month; lease payments under long-term lease contracts will be $7,000 a month; depreciation charges will be $8,000 a month; miscellaneous expenses will be $5,000 a month; income tax payments of $30,000 will be due in both August and December; and a progress payment of $95,000 on a new office suite must be paid in October. Cash on hand on July 1 will amount to $70,000, and a minimum cash balance of $30,000 will be maintained throughout the cash budget period.

1. Prepare a monthly cash budget for the last 6 months of 2020.
2. Prepare an estimate of the required financing (or excess funds)that is, the amount of money Marvels Renovations will need to borrow (or will have available to invest)for each month during that period.
3. Would the cash budget be accurate if inflows came in all during the month, but outflows were bunched early in the month?

Here is the information in the document:

Input Data

Collections during month of sale

20%

Collections during month after sale

60%

Collections during second month after sale

25%

Lease payments

$7,000

Target cash balance

$30,000

General and administrative salaries

$25,000

Depreciation charges

$8,000

Income tax payments (Sep & Dec)

$30,000

Miscellaneous expenses

$5,000

New office suite payment (Oct)

$95,000

Cash on hand July 1

$70,000

Sales, labor, and RM adjustment factor

0%

a. Prepare a monthly cash budget for the last six months of the year.

May

June

July

August

September

October

November

December

January

Original sales estimates

$75,000

$115,000

$145,000

$125,000

$120,000

$95,000

$75,000

$55,000

$45,000

Original labor and raw mat. estimates

$80,000

$75,000

$105,000

$85,000

$65,000

$70,000

$30,000

$35,000