Preparing Cash Budget for second quarter.
Prepare a cash budget for Rotor Products, Inc. for the second quarter of 2006, based on the following information. The marketing department has provided you with the following sales estimates, all of which are for cash:
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Total sales
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March 2006 (actual)
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$425,000
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April 2006
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$330,000
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May 2006
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$420,000
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June 2006
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$450,000
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The company estimates its purchases at 60 percent of the next month's sales, and payments for those purchases are budgeted to lag the purchases by 1 month.
Various disbursements have been estimated as follows:
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April
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May
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June
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Wages\\salaries
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$220,000
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$190,000
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$190,000
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Rent
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$14,000
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$14,000
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$14,000
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Other Expenses
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$5,000
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$6,000
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$7,000
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In addition, a tax payment o $55,000 is due on April 15. The company's projected cash balance at the beginning of April is $60,000, and the company desires to maintain a balance of $50,000 at the end of each month.