Question

Melanie Inc. provides you with the following budgeted information for two months in year 2013:

	March	April
Sales	$600,000	$630,000
Manufacturing Costs	230,000	400,000
Capital Expenditures*	275,000	25,000
General and Administration Costs (including amortization)	100,000	125,000
*includes training programs, machines and buildings

Expectations:

• Cash sales represent 10% of total sales
• All sales on account are collected in the following month
• 65% of March’s $275,000 worth of capital expenditures is to be paid at the end of March. The remainder is to be paid in the following month. April's capital expenditure will be paid in May.
• Monthly amortization represents 20% of general and administration costs
• Manufacturing costs and general and administration costs are to be paid in the month in which they are incurred
• Dividends of $7,000 are expected to be declared in March and paid in April
• Melanie Inc. obtains the minimum financing needed to ensure at least a $6,000 cash balance at the end of the month through a bank loan. Assume that any amount taken out of the bank loan may be repaid only at year end.

As of March 1

Cash	$20,000
Accounts Receivable*	187,000
Inventory	30,000
Long-Term Assets	85,000
Accumulated Depreciation	8,000
Accounts Payable	13,000
Dividends Payable (in March)	5,000
Notes Payable	193,000
Stockholder's Equity	103,000
*Comprised only of sales on account incurred in February

Do not enter dollar signs or commas in the input boxes.
Use the negative sign for negative values.

a) Prepare a cash budget for March and April.

Receipts:  

Melanie Inc. Cash Budget for March and April
	March	April
Cash from sales	$Answer	$Answer
Collection from customers	$Answer	$Answer
Total cash receipts:	$Answer	$Answer
Disbursements:
Manufacturing costs	$Answer	$Answer
General and admin. costs	$Answer	$Answer
Capital Expenditures	$Answer	$Answer
Dividend Payment	$Answer	$Answer
Total Cash Disbursements:	$Answer	$Answer
Cash Excess (Deficit)	$Answer	$Answer
Financing Requirements:
Bank Loan	$Answer	$Answer
Total Cash Inflow / (Outflow)	$Answer	$Answer
Opening Cash Balance	$Answer	$Answer
Ending Cash Balance	$Answer	$Answer

Answer 1

Here Cash Sales Represent -10% of Total Sales.

All Balance sales are collected in the next month-

As. Of March,1-

Accounts Receivable- Which is sale of February,13 Received-March,13

So, collection from customers in March-$187000

In March, Cash Sales-10% of $600000 = $60000

In April, Collection from customers- (600000-60000)$540000.

In April, Cash Sales-10% of $630000 = $63000.

Here,65% of March’s Capital expenditure is paid at the end of March,13

So, March- $275000x65%=$178750.

Rest to be paid in April,2013 – $275000-$178750 = $96250.

March & April General & Administration Cost is $100000 & $125000.

Among which- Amortization Cost of 20% included and to be deducted.

So, Cash disbursement for General & Administration Cost for both months

Are $80000 and $10000 respectively.

Melanle Inc.
Cash Budget for March & April
	March	April
Cash from Sales	60000	63000
Collection from customers	187000	540000
Total Cash Receipts	247000	603000
Disbursements :
Manufacturing Costs	230000	400000
General and admin. Costs	80000	100000
Capital Expenditures	178750	96250
Dividend Payment	5000	7000
Total Cash Disbursements	493750	603250
Cash Excess (Deficit)	-246750	-250
Financing Requirements :
Bank Loan	220750	250
Total Cash inflow / Outflow	-246750	-250
Opening Cash Balance	20000	6000
Ending Cash Balance	6000	6000

Hope, the above solution will give some idea of the factor You are searching. If, any question on the above Please do contact. Many Thanks.