Cash Budget Needed
Not what you're looking for?
To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next 9 months:
March $250,000
April $275,000
May $320,000
June $450,000
July $575,000
August $700,000
September $825,000
October $350,000
November $285,000
He has also gathered the following collection estimates regarding the forecast sales:
Payment collection within the month of sale = 10%
Payment collection the month following sales = 65%
Payment collection the second month following sales = 25%
Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:
March $187,500
April $206,250
May $240,000
June $337,500
July $431,250
August $525,000
September $618,750
October $262,500
Additional financial information is as follows:
Administrative salaries will approximately amount to $35,000 a month.
Lease payments around $15,000 a month.
Depreciation charges, $15,000 a month.
A one-time new plant investment in the amount of $95,000 is expected to be incurred and paid in June.
Income tax payments estimated to be around $55,000 will be due in both June and September.
And finally, miscellaneous costs are estimated to be around $10,000 a month.
Cash on hand on March 1 will be around $50,000, and a minimum cash balance of $50,000 shall be on hand at all times.
To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.
Guidelines:
Prepare a monthly cash budget for Cyrus Brown Manufacturing for the 9-month period of March through November.
Use Microsoft Excel to prepare the monthly cash budget.
Based on your cash budget findings, answer the following questions:
Will the company need any outside financing?
What is the minimum line of credit that CBM will need?
What do you think of CBM's cash position during the budget period? Do you see any concerns for the company in this regard?
If you were a bank manager, would you want CBM as your client? Why or why not?
Assistance is needed...................
Purchase this Solution
Solution Summary
The solution determines the cash budget needed.
Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Business Processes
This quiz is intended to help business students better understand business processes, including those related to manufacturing and marketing. The questions focus on terms used to describe business processes and marketing activities.
Learning Lean
This quiz will help you understand the basic concepts of Lean.
Managing the Older Worker
This quiz will let you know some of the basics of dealing with older workers. This is increasingly important for managers and human resource workers as many countries are facing an increase in older people in the workforce
Business Ethics Awareness Strategy
This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.