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a manufacturing company has been growing quickly but has found that its financial situation is continually under pressure. Production has fluctuated to meet demand in an attempt to provide first class service, resulting in larger inventory positions. Also, the collection of accounts has worsened to approximately 60 days which is well above the terms of 30 days. To address the financial concerns to bring the average collection period down to 35 days.

Estimated sales for the upcoming months are

July $1,957,500

August 2,070,000

September 2,205,000

October 2,362,500

November 2,475,000

December 2,565,000

Sales for May were 1,732,500 and will be approximately $1,845,000 for the current month of June.

It is projected that the current collection period of 60 days will be reduced to 50 days for July and August, 42 days for September and October, and will meet the target of 35 days in Nov and Dec. Purchases are forecast to be $585,000 a month beginning in July, until December. In May they were $675,000 and in June they ware expected to be $607,500. The purchases are paid in 40 days. Labour expense will be paid as incurred and will be $195,000 a month. Other expenses of manufacturing will also be paid as incurred and are expected to be $375,000 a month. Cost of goods sold has regularly been 70% of sales.

Amortization is $38,000 per month. Selling and administrative expense are expected to be 13% of sales. The tax rate is 42%.

There will be payments on notes of $675,000 in each of August and November. Interest of $270,000 and income taxes of $338,000 are both due in October, Dividends of $22,500 are payable in July and October.

Balance sheet

Assets

Current assets:

Cash $666

Accounts receivable 3,578

Inventory 8,231

Total current assets: $12,475

Capital assets:

Plant and equipment 11,273

Less: accumulated amortization 4,784 6,489

Total assets: $18,964

Liabilities and shareholders equilty

Current liabilities

Accounts payable $945

Notes payable 3,700

Accrued liabilities 2,596

Total current liabilities $7,241

Longterm debt $4,725

Common stock $4,500

Retained earnings 2,498

Total liabilities and shareholders equity $18,964

Using the information above, construct a cash budget for the 6-month period and identify any need for short-term financing.