The following budget assumptions were used to construct the budget: Mellon's total sales for each month were first calculated in the sales budget and are reflected on the first line of the cash budget. Mellon's sales are made on credit with terms of 2/10, net 30. Mellon's experience is that 20% is collected from customers who take advantage of the discount, 70% is collected in the second month, and the last 10% is collected in the third month after the sale. The budget assumes that there are no bad debts. The cost of materials averages 55% of Mellon's finished product. The purchases are generally made one month in advance of the sale, and Mellon pays its suppliers in 30 days. Accordingly, if July sales are forecasted at $1,100 million, then purchases during June would be $605 ($1,100 million x 0.55), and this amount would be paid in July Other cash expenses include wages and salaries at 15% of sales, monthly rent of $40 million, and other expenses at 5% of sales. Estimated tax payments of $59 million and $61 million are required to be paid on July 15 and October 15, respectively. In addition, a $1,000 million payment for a new plant must be made in September Assume that Mellon's targeted cash balance is $200, and the estimated cash on hand on July 1 is $188. Use the preceding information to fill in the missing amounts in the following cash budget. Mellon Company Cash Budget For the Six Months Ended December 31, Year 1 ($ millions) May $950 June $980 July $1,000 August September $1,010 $1,030 567 578 Credit sales Credit purchases October $1,050 594 November $1,080 605 December $1,100 550 July August September October November December 202 198 700 212 735 216 756 707 206 721 101 $1,028 98 $996 100 $1,009 103 $1,050 105 $1,077 550 150 567 155 594 162 40 605 165 556 152 40 51 Cash receipts Collections from this month's sales Collections from previous month's sales Collections from sales two months previously Total cash receipts Cash disbursements Payments for credit purchases Wages and salaries Rent Other expenses Taxes Payment for plant construction Total cash disbursements Net cash flow (Receipts - disbursements) Beginning cash balance Ending cash balance Target (minimum) cash balance Surplus (shortfall) cash 40 40 50 40 55 52 54 59 1,000 $1,814 $849 $799 $ $850 $865 $128 188 $197 316 -$805 513 $138 -292 $200 -154 $212 46 $258 $316 200 $116 $513 200 -$154 200 $ 46 200 -$154 200 $313 -$354 $58 Use the information provided in the budget to complete the following sentences. Mellon Company will be able to invest in short-term marketable securities in some months and will need to borrow to cover cash requirements in others. In the last six months of the year, Mellon will $ to end the year with a cash of $ and a cash of $ Mellon Company will want a credit line of at least $ to cover the month with the greatest shortfall, and the financial managers can tell the bank to expect that they will be able to invest up to $ in short-term marketable securities