Question

Alpha-Tech, a rapidly growing distributor of electronic components, is formulating its plans for 20x5. Carol Jones, the firm's marketing director, has completed the following sales forecast. ALPHA-TECH 20x5 Forecasted Sales (in thousands) Month Sales $ 9,000 January February 10,000 9,000 11,500 12,500 14,000 March April May June July August September October November 15,000 15,000 16,000 16.000 15,000 17,000 December Phillip Smith, an accountant in the Planning and Budgeting Department, is responsible for preparing the cash flow projection. The following information will be used in preparing the cash flow projection. Alpha-Tech's excellent record in accounts receivable collection is expected to continue. Sixty percent of billings are collected the month after the sale, and the remaining 40 percent two months after. • The purchase of electronic components is Alpha-Tech's largest expenditure, and each month's cost of goods sold is estimated to be 40 percent of sales. Seventy percent of the parts are received by Alpha-Tech one month prior to sale, and 30 percent are

Prepare a cash budget for Alpha-Tech by month for the second quarter of 20x5. For simplicity, ignore any interest expense associated with borrowing. (Negative amounts should be indicated by a minus sign.)

Answer 1

Cash Budget
For the Secong Quarter of 20x5
	April	May	June
Beginning Balance	$   550,000.00	$       550,000.00	$    1,268,000.00
Collections:(1)
February Sales	$4,000,000.00
March Sales	$5,400,000.00	$    3,600,000.00
April Sales		$    6,900,000.00	$    4,600,000.00
May Sales			$    7,500,000.00
Total Receipts	$9,400,000.00	$ 10,500,000.00	$ 12,100,000.00
Total Cash Available	$9,950,000.00	$ 11,050,000.00	$ 13,368,000.00
Disbursements:
Accounts Payable	$4,126,000.00	$    4,706,000.00	$    5,258,000.00
Wages(2)	$3,450,000.00	$    3,750,000.00	$    4,200,000.00
General and Administrative(3)	$   895,000.00	$       895,000.00	$       895,000.00
Property Tax			$       355,000.00
Income Tax(4)	$1,360,000.00
Total disbursements	$9,831,000.00	$    9,351,000.00	$ 10,708,000.00
Cash Balance	$   119,000.00	$    1,699,000.00	$    2,660,000.00
Cash Borrowed	$   431,000.00
Cash Repaid		$      (431,000.00)
Ending Balance	$   550,000.00	$    1,268,000.00	$    2,660,000.00

Working:

1. 60% of sales in first month; 40% of sales in second month

2. 30% of current month sales

3. (Total less property taxes and depreciation) / 12

4.40% x $3,200,000

COST OF GOODS SOLD
Month	40% of Sales	Timing	February	March	April	May	June
February	$4,000,000	30%	$1,200,000
March	$3,600,000	70%	$2,520,000
March	$3,600,000	30%		$1,080,000
April	$4,600,000	70%		$3,220,000
April	$4,600,000	30%			$1,380,000
May	$5,000,000	70%			$3,500,000
May	$5,000,000	30%				$1,500,000
June	$5,600,000	70%				$3,920,000
			$3,720,000	$4,300,000	$4,880,000	$5,420,000	$                 -
PAYMENTS
February	$3,720,000	30%			$1,116,000
March	$4,300,000	70%			$3,010,000
March	$4,300,000	30%				$1,290,000
April	$4,880,000	70%				$3,416,000
April	$4,880,000	30%					$1,464,000
May	$5,420,000	70%					$3,794,000
					$4,126,000	$4,706,000	$5,258,000