Cyrus
Brown Manufacturing (CBM).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).
Please
read the relevant parts of your textbook, which refer to cash flow and
financial planning.
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
|
$100,000
|
April
|
$275,000
|
May
|
$320,000
|
June
|
$450,000
|
July
|
$700,000
|
August
|
$700,000
|
September
|
$825,000
|
October
|
$500,000
|
November
|
$115,000
|
He
has also gathered the following collection estimates regarding the forecast
sales:
Payment
collection within the month of sale = 25%
Payment
collection the month following sales = 55%
Payment
collection the second month following sales = 20%
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
|
$375,000
|
June
|
$337,500
|
July
|
$431,250
|
August
|
$640,000
|
September
|
$395,000
|
October
|
$425,000
|
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.
SOLUTION
PREVIEW
a.
|
|||||||||
Cash Budget
|
|||||||||
Particulars
|
March
|
April
|
May
|
June
|
July
|
August
|
September
|
October
|
November
|
Receipts:
|
|||||||||
25% of current month's sales
|
25000
|
68750
|
80000
|
112500
|
175000
|
175000
|
206250
|
125000
|
28750
|
55% of previous month's sales
|
55000
|
151250
|
176000
|
247500
|
385000
|
385000
|
453750
|
275000
|
|
20% of 2 month's before sales
|
20000
|
55000
|
64000
|
90000
|
140000
|
140000
|
165000
|
File name: Cyrus-Brown-Manufacturing-financial-planning.xls File type: XLS Price: $10
