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

	June	July	August
Sales	160000	185000	200000
Manufacturing costs	66000	82000	105000
selling and administrative expenses	40000	46000	51000
Capital expenditures	-	-	120000

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainderthe following month ( second month after sale). Deprecation, insurance, and property taxs expense represent 12000 of the estimated monthly manufacturing costs. The anual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month.

Current assets as of June 1 include cash of 42000, marketable securities of 25000, and accounts recievable of 198000 (150000 from May sales and 48000 from April sales). Sales on account in April and May were 120000 and 150000, respectively. Current Liabilities as of June 1 include 13000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimate income tax payment of 24000 will be made in July.Mercury Shoes regular quarterly dividend of 15000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40000.

1 Prepare a monthly cash budget and supporting schedules for June, July, and August 2016.

2 On the basis of the cash budget prepared in part (1) , what recommendation should be made to the controller?