You are a management consultant Refer to scenario and produce the following;

Question

need to construct a monthly cash budget for October to March (inclusive) based on initial forecasts and a brief interpretation that also highlights any major implication(s) for the business; can someone check to see if my calculations are correct.

Scenario

Dev Patel has registered a new private company for his latest business venture. Dev is the only shareholder of the company. He intends opening to customers in the first week of October and he wants the business to begin making a monthly operating profit of $10,000 within the first six months of operation. In September, Dev intends to open a company bank account and deposit $20,000 plus the sum required to buy company non-current assets. These assets will be bought and paid for by the company on October 1 st. Dev expects furniture, fixtures and fittings to cost $30,000 and have a 10-year useful life, while computer equipment will cost $9,000 and have a 3-year useful life. All these assets will be depreciated using the straight-line method but none have any expected salvage value at the end of their useful lives.

Dev's business will sell candles to homeware stores for $10 each. Projected monthly sales in units (candles) are: 5,000 in October; 6,000 in November; 7,000 in December; 8,500 in January; and 10,000 each month after that. Forty per cent of customers are expected to pay in the month of sale, 50% in the month after sale, and the remainder in the second month after sale.

Negotiations with a supplier resulted in a one-year contract starting in September that specifies an $7.50 cost per unit for a monthly order of at least 5,000 units and payment to be made within 21-days of order. The contract also specifies order delivery within one week so Dev plans to order in the third week of each month, commencing in September, and pay at the end of the credit period. He will order the number of units that he expects the business to sell in the upcoming month.

Expected company operating expenses per month from October onwards, all of which will be paid for in the month incurred are: wages $6,000; utilities $2,000; insurance $4,000; and marketing $2,500. In addition, quarterly rent payments of $9,000 for an office and storeroom will be made in advance, commencing at the beginning of October.

Budget Income Statement Month Sales (Units) Purchases (Units) September October November December January February March September 5000 October 5000 5000 Sales 50,000.00 $ 60,000.00 70,000.00 85,000.00 $ 100,000.00 $ 100,000.00 November 6000 7000 Setup Cost non-current assets 39,000.00 $ $ $ December 700 850 Cash Investment 20,000.00 S January 8500 10000 Salary Expense 6,000.00 6,000.00 $ 6,000.00 6,000.00 S 6,000.00 6,000.00 February 10000 10000 Utilities 2,000.00 2,000.00 $ 2,000.00 2,000.00 $ 2,000.00 $ 2,000.00 March 10000 Insurance 4,000.00 4,000.00 $ 4,000.00 4,000.00 $ 4,000.00 $ 4,000.00 Based on Sales of $10 per unit Marketing 2,500.00 $ 2,500.00 2,500.00 2,500.00 $ 2,500.00 2,500.00 Cost per unit $7.50 Payment 21 Days from Order (Monthly Orders) Rent Expense 9,000.00 9,000.00 Product Cost 37,500.00 $ 45,000.00 52,500.00 63,750.00 75,000.00 $ 75,000.00 Product Sales Schedule September October November December January February March (Cost of the Asset - Salvage Value) Annual Depreciation Expense Sale (in units) 5000 7000 8500 10000 10000 Useful Life of the Asset Sales price/unit 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.00 Revenue 50,000.00 $ 60,000.00 $ 70,000.00 $ 85,000.00 $ 100,000.00 $ 100,000.00 Annual Depreciation Expense Straight Line Depreciation Rate = Schedule of credit payments for sales (Collection) September October November December January February March (Cost of the Asset - Salvage Value) From current month 10% $ 20,000.00 $ 24,000.00 $ 28,000.00 $ 34,000.00 $ 40,000.00 $ 40,000.00 From previous month 50% S 25,000.00 $ 30,000.00 35,000.00 $ 42,500.00 $ 50,000.00 Straight Line Depreciation From 2mths prior 10% $ 5,000.00 6,000.00 $ 7,000.00 8,500.00 Item Furniture, Fixtures & Fittings Total Payments Reciepted S 20,000.00 $ 49,000.00 53,000.00 $ 75,000.00 $ 89,500.00 $ 98,500.00 Year Book Value (Beginning of Year) Depreciation Book Value (End of Year) 1 S 30,000.00 $ 3,000.00 $ 27,000.00 Product Purchases Schedule September October November December January February March 2 27,000.00 $ 3,000.00 $ 24,000.00 Order (in units) 5000 6000 7000 8500 1000 1000 10000 3 $ 24,000.00 $ 3,000.00 $ 21,000.00 Purchase cost/unit 7.50 $ 7.50 $ 7.50 $ 7.50 $ 7.50 $ 7.50 $ 7.50 4 21,000.00 $ 3,000.00 $ 18,000.00 Purchase cost 37,500.00 45,000.00 52,500.00 S 63,750.00 75,000.00 $ 75,000.00 75,000.00 5 18,000.00 $ 3,000.00 $ 15,000.00 Payment to supplier 37,500.00 $ 45,000.00 $ 52,500.00 $ 63,750.00 $ 75,000.00 $ 75,000.00 6 15,000.00 $ 3,000.00 $ 12,000.00 7 $ 12,000.00 3,000.00 $ 9,000.00 Cash Budget 8 $ 9,000.00 $ 3,000.00 $ 5,000.00 Cash Receipts (Inflow) September October November December January February March 5,000.00 $ 3,000.00 $ ,000.00 Receipts from Sales 3,000.00 $ 3,000.00 $ Total Receipts 20,000.00 $ 49,000.00 $ 63,000.00 $ 75,000.00 $ 89,500.00 $ 98,500.00 $ 20,000.00 $ 19,000.00 $ 63,000.00 $ 75,000.00 $ $9,500.00 $ 8,500.00 Item: Computer Equipment Cash Payments (Outflow) Year Book Value (Beginning of Year) Depreciation Book Value (End of Year) Salary Expense 6,000.00 $ 6,000.00 S 6,000.00 6,000.00 $ 6,000.00 S 6,000.00 S 9,000.00 S 3,000.00 $ 6,000.00 Utilities 2,000.00 2,000.00 $ 2,000.00 2,000.00 $ 2,000.00 2,000.00 3,000.00 $ ,000.00 W N S 6,000.00 $ Insurance 4,000.00 4,000.00 4,000.00 4,000.00 $ 4,000.00 $ 4,000.00 3,000.00 $ 3,000.00 $ Marketing 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 2,500.00 Rent Expense 9,000.00 9,000.00 $ Product Cost (Payment to Supplier) 37,500.00 45,000.00 52,500.00 63,750.00 $ 75,000.00 75,000.00 Total Cash Payments 61,000.00 $ 59,500.00 $ 67,000.00 $ 87,250.00 $ 89,500.00 89,500.00 Cash Surplus/Deficit 41,000.00 -$ 10,500.00 -$ 4,000.00 -$ 12,250.00 $ $ 9,000.00 Opening Cash Balance 59,000.00 59,000.00 $ 18,000.00 $ 7,500.00 $ 3,500.00 -$ 8,750.00 -$ 8,750.00 Closing Cash Balance 59,000.00 18,000.00 $ 7,500.00 $ 3,500.00 -$ 8,750.00 -$ 8,750.00 $ 250.00