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cash budget for May, June, and July

Burt's Dirt Corp. (BDC) had sales of $2 million in March and $2.2 million in April. Expected sales for the
next three months are $2.4 million, $2.5 million, and $2.7 million. Bachrach has a cash balance of $200,000 on May 1 and does not want its balance to dip below that level. Prepare a cash budget for May, June, and July given the
following information:

1. Of total sales, 30% are for cash, 50% are collected in the month after the sale, and 20% are collected two months after
the sale.

2. BDC has cash receipts from other sources of $100,000 per month.

3. The firm expects to purchase items for $2 million in each of the next three months. All purchases are paid for in cash.

4. BDC has fixed cash expenses of $150,000 per month and variable cash expenses equal to 5 % of the previous month's sales.

5. BDC will pay a cash dividend of $300,000 in June.

6. The company must make a $250,000 loan payment in June.

7. BDC plans to acquire fixed assets worth $500,000 in July.

8. BDC must make a tax payment of $225,000 in June.

Solution Preview

Cash Budgets
Burt's Dirt Corp. (BDC) had sales of $2 million in March and $2.2 million in April. Expected sales for the
next three months are $2.4 million, $2.5 million, and $2.7 million. Bachrach has a cash balance of $200,000 on May 1 and does not want its balance to dip ...

Solution Summary

The solution discusses the cash budget for May, June, and July.

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