Problem

Presented below are selected budget data items for Globe Corporation for a three-month period: October November December Sales $908,000 $891,000 $887,000 Direct materials 127,700 124,000 129,000 Direct labor 94,000 95,000 96,400 Variable overhead 67,900 69,250 71,000 Fixed overhead 145,000 145,000 145,000 Selling and Administrative expenses 309,000 310,820 312,600 Fixed loan payments 135,100 135,100 135,100 Sales were $820,000 in August and $865,500 in September. Material usage was $117,100 in August and $121,800 in September. All sales are on account, and accounts receivable is historically collected 15% in the month of sale, 65% in the month following sales, and the remainder two months after the sale. Materials are paid for 35% in the month used and 65% the following month. All other expenses are paid in the month incurred. The cash balance was $42,000 at the beginning of October, and management wants to determine if the company will have enough cash to pay a year-end bonus. Prepare a three-month cash budget, including a schedule for cash collections and material payments.