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

The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property tax expense represent $20,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, 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 April 1 include cash of $40,000, marketable securities of $65,000, and accounts receivable of $109,600 ($85,000 from March sales and $24,600 from February sales). Current liabilities as of April 1 include a $50,000, 12%, 90-day note payable due June 20 and $25,000 of accounts payable incurred in March for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $3,000 in dividends will be received in April. An estimated income tax payment of $32,000 will be made in May. Digital Storage€™s regular quarterly dividend of $10,000 is expected to be declared in May and paid in
June. Management desires to maintain a minimum cash balance of $35,000.

Instructions
1. Prepare a monthly cash budget and supporting schedules for April, May, and June.
2. On the basis of the cash budget prepared in (1), what recommendation should be made to thecontroller?

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May $90,000 140,000 $150,000 48,000 36,000 April une 50,000 40,000 60,000 Selling and administrative expenses35,000