You are the Management Accountant of Caris shoe store and you are involved in the budgetary process, including operating and financial budgets, for the income year ending December 2020. One component of the financial budget is the cash budget.

The opening cash balance on 1st January was expected to be $30000. The sales budgeted were as follows:

Month

November 80000

December 90000

January 75000

February 75000

March 80000

Analysis of records shows that debtors settle in the following pattern:

60%-------------Within the month of sale

25%-------------The month following

15%-------------The month following

Extracts from the purchases budget were as follows:

Month $

December 60000

January 55000

February 45000

March 55000

All purchases are on credit and past experience shows that 90% are settled in the month following purchase and the balance settled the month after. Wages are $15000 per month and overheads are $20000 per month (including $5000 depreciation) are settled monthly. Taxation of $8000 has to be settled in February and the company will receive settlement of an insurance claim of $25000 in March.

Required:

a. Prepare a cash budget for each of the months January, February, and March.

b. Prepare a cash budget for the period January to March

c. Caris need to maintain a minimum cash balance of $ 20000. Will Caris be able to maintain such a minimum balance for each month? If not, what cash management strategy do you recommend and why?