Question

Janus Inc. needs to prepare a cash budget. The following are actual and forecasted sales figures:

Actual		Forecast
November	December	January	February	March	April
$200,000	$220,000	$280,000	$320,000	$340,000	$330,000

Thirty percent of each month's sales are in cash, 50% are paid the month after sale and 20% are paid two months after sale. Materials cost 30% of sales and are purchased one month prior to sale and paid for 30 days later. Labor expense is 40% of sales, selling and administrative expenses are 5% of sales and both are paid in the month of sale. Overhead is $28,000 per month, depreciation expense is $10,000 per month. Taxes of $8,000 will be paid in January and dividends of $2,000 will be paid in March. Cash on hand at the beginning of January is $80,000 and the desired cash balance is $75,000. Prepare the cash budget for January – March. Please show all work.

Answer 1

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