Prepare a cash budget for elmwood manufacturing company

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Reference no: EM131339878

Prepare a cash budget for Elmwood Manufacturing Company for the first three months of 2007 based on the following information:

Month	Estimated Sales	Estimated Factory Overhead	Estimated Selling and Administrative Expenses
December	$ 4,600,000	$ 640,000	$ 1,250,000
January	6,400,000	650,000	1,275,000
February	11,200,000	670,000	1,285,000
March	8,400,000	670,000	1,310,000
April	7,000,000	680,000	1,300,000

The company has found that approximately 40 percent of sales are collected during the month the sale is made and the remaining 60 percent are collected during the month following the sale. Material purchases are 30 percent of next month's estimated sales, and payments lag these purchases by one month. Labor costs are 35 percent of next month's sales and are paid during the month incurred. Factory overhead and selling and administrative expenses are paid during the month incurred.

In addition, a payment for new equipment of $1.5 million is due in February. Also, a tax payment of $1.6 million and a dividend payment of $650,000 are due in March.

The company's projected cash balance at the beginning of January is $1.5 million. Furthermore, Elmwood desires to maintain a $750,000 cash balance at the end of each month.

Reference no: EM131339878

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