Juan's Taco Company has restauraunts in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr. Bryan, the banker, will finance construction if Juan can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures:
Actual & Forecast
Of Juan's sales, 30% are cash and the remaining 70% are credit. Of credit sales, 40% are paid in the month after sale, and 60% are paid in the second month after the sale. Materials cost 20% of sales and are paid for in cash. Labor is 50% of sales and is also paid in the month of sales. Selling and administrative expense is 5% of sales and is also paid the month of sales. Overhead expense is $12,000 and dividends of $16,000 will be paid in March. Cash at the beginning of January is $70,000 and the minimum desired cash balance is $65,000.
For January, February and March, prepare a schedule of monthly cash reciepts, mothly cash payments, and a complete monthly cash budget with borrowings and repayments.
60% of 70% of November's sales = .6*.7*120000=50400
40% of 70% of December's sales = .4*.7*140000=39200
30% of January sales = .3*190000 = 57000
Total = 146600
materials = 20% of sales = .2*190000=38000
labor = 50% of sales = .5*190000=95000
selling&administrative = 5% of sales = ...
This uses the example of a restaurant to present a three-month financial plan.