Prepare a three-month cash budget

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Reference no: EM131931776

Problem

	October	November	December
Sales	960,000	870,000	850,000
Direct Materials	123,000	119,000	125,000
Direct Labor	90,000	85,000	96,000
Variable Overhead	65,600	62,400	68,000
Fixed Overhead	140,000	140,000	140,000
Selling and Admin Costs	312,000	310,000	315,000
Fixed Loan Payments	140,000	140,000	140,000

Sales were $770,000 in August and $840,000 in September. Material usage was $115,000 in August and $118,000 in September. All sales are on account, and accounts receivable is historically collected 15% in the month of sale, 65% in the month following sales, and the remainder two months after the sale. Materials are paid for 40% in the month used and 60% the following month. All other expenses are paid in the month incurred. The cash balance was $35,000 at the beginning of October, and management wants to determine if the company will have enough cash to pay a year-end bonus.

Prepare a three-month cash budget, including a schedule for cash collections and material payments.

Reference no: EM131931776

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