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# Cash Budgeting; ways to maintain cash flow

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Theorize the following questions based upon provided data. See attached file.

a. What changes could the company make if they wanted to maintain a cash balance of \$650,000, rather than \$350,000?
b. What is the company's cost of borrowing was 6%, rather than 12%? What recommendations would you make to them?
c. What is the company experienced 10% of bad debt per year? What would be the impact on their ending cash?

Revenues Schedule 1 \$36,860,000
Cost of goods sold Schedule 7 24,440,000
Gross margin 12,420,000
Operating costs
Product design Schedule 8 \$1,024,000
Marketing costs Schedule 8 3,725,900
Distribution costs Schedule 8 3,876,000 8,625,900
Operating income 3,794,100

Budgeted Cash Flows Quarters
1 2 3 4
Collections from customers \$9,136,600 \$10,122,000 \$10,263,200 \$8,561,200
Disbursements
Direct materials 2,947,605 2,714,612 2,157,963 2,155,356
Payroll 3,604,512 2,671,742 2,320,946 2,562,800
Manufacturing overhead costs 2,109,018 1,530,964 1,313,568 1,463,450
Nonmanufacturing costs 1,847,750 1,979,000 1,968,250 1,705,000
Machinery purchase â?" â?" 758,000 â?"
Income taxes 725,000 400,000 400,000 400,000

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Your tutorial is in Excel (attached). Click in cells to see computations.

a. What changes could the company make if they wanted to maintain a cash balance of \$650,000, rather than \$350,000?

I don't have the opening cash but I am presuming that the \$350,000 is approximately the "net" cash for the year (see E123) after ...

#### Solution Summary

Your tutorial is in Excel (attached). Click in cells to see computations.

\$2.19