Prepare a cash budget for Atlas Products, Inc., for the first quarter of 2006, based on the following information.
The budgeting section of the corporate finance department of Atlas Products has received the following sales estimates from the marketing department:
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|
Total Sales
|
Credit Sales
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|
December 2005
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$825,000
|
$770,000
|
|
January 2006
|
730,000
|
690,000
|
|
February 2006
|
840,000
|
780,000
|
|
February 2006
|
920,000
|
855,000
|
The company has found that, on average, about 25 percent of its credit sales are collected during the month when the sale is made, and the remaining 75 percent of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting.
The company estimates its purchases at 60 percent of next month's sales, and payments for those purchases are budgeted to lag the purchases by one month.
Various disbursements have been estimated as follows:
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January
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February
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March
|
|
Wages and Salaries
|
$250,000
|
$290,000
|
$290,000
|
|
Rent
|
27,000
|
27,000
|
27,000
|
|
Other Expenses
|
10,000
|
12,000
|
14,000
|
In addition, a tax payment of $105,000 is due on January 15, and $40,000 in dividends will be declared in January and paid in March. Also, the company has ordered a $75,000 piece of equipment. Delivery is scheduled for early January, and payment will be due in February.
The company's projected cash balance at the beginning of January is $100,000, and the company desires to maintain a balance of $100,000 at the end of each month.