Aztec Company sells its product for $190 per unit. Its actual and projected sales follow.
|
|
Units
|
Dollars
|
|
April (actual)
|
6,500
|
$1,235,000
|
|
May (actual)
|
3,800
|
722,000
|
|
June (budgeted)
|
6,500
|
1,235,000
|
|
July (budgeted)
|
5,500
|
1,045,000
|
|
August (budgeted)
|
3,800
|
722,000
|
All sales are on credit. Recent experience shows that 28% of credit sales is collected in the month of the sale, 42% in the month after the sale, 29% in the second month after the sale, and 1% proves to be uncollectible. The product's purchase price is $110 per unit. All purchases are payable within 13 days. Thus, 60% of purchases made in a month is paid in that month and the other 40% is paid in the next month. The company has a policy to maintain an ending monthly inventory of 25% of the next month's unit sales plus a safety stock of 185 units. The April 30 and May 31 actual inventory levels are consistent with this policy. Selling and administrative expenses for the year are $1,848,000 and are paid evenly throughout the year in cash. The company's minimum cash balance at month-end is $140,000. This minimum is maintained, if necessary, by borrowing cash from the bank. If the balance exceeds $140,000, the company repays as much of the loan as it can without going below the minimum. This type of loan carries an annual 13% interest rate. On May 31, the loan balance is $49,500, and the company's cash balance is $140,000. (Round final answers to the nearest whole dollar.)
Prepare a cash budget for June and July, including any loan activity and interest expense. Compute the loan balance at the end of each month.