January February March April
Sales $50,000 $50,000 $40,000 $60,000
Wages 3,000 4,000
Rent 1,000 1,000
Other 400 600
Taxes 8,000
Experience shows that 20% of customers pay in the month of sale, 70% pay
1 month later, and the rest of paying customers pay 2 months after sale. 3%
of customers never pay. Inventory is purchased 1 month prior to sale, and
cost of goods sold equals 70% of sales . Accounts payable are paid 30 days
after purchase. Any financing is done through a 12% line of credit. The
company has $5,000 cash on hand March 1 and would like to retain a cash
balance of $5,000.
CASE 10.1 NEW TECH: MONTHLY CASH BUDGET
C
ASH BUDGET
Using a spreadsheet, prepare a cash budget for New Tech for the next
year (January through Decem ber) based on the following information.
October November December
Sales revenue (previous year) 325.0 325.0 325.0
Purchases 59.2
PAYMENT SCHEDULE
Cash sales ¼ 10% 10%
30-day payment ¼ 70% 70%
60-day payment ¼ 20% 20%
PURCHASE SCHEDULE
Paid in first month ¼ 40% 40%
Paid during second 60 days ¼ 60% 60%
Jan. Feb. March April May June July Aug. Sept. Oct. Nov. Dec.
Sales revenue 325 300 275 325 350 375 400 375 350 300 275 250
Purchases 59.0 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2 59.2
DISBURSEMENTS
Freight in 4.2 4.0 5.1 5.4 7.3 6.5 6.7 6.6 6.1 7.0 5.8 5.7
Labor 40.0 39.0 38.0 42.0 38.4 44.3 42.5 41.0 38.0 39.0 39.5 38.0
328 Internal Financial Management

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