Capers Inc. is developing its cash budget for the next year. Of Capers%u2019 sales 20% is for cash another 60% is collected in the month
following sale and 20% is collected in the second month following sale. November and December sales for 2010 were $229000 and $250000 respectively.
Capers%u2019 purchases its raw materials two months in advance of its sales equal to 70% of its final sales price. The supplier is paid one
month after it makes delivery. For example purchases for April sales are made in February and payment is made in March.
In addition Capers pays $10000 per month for rent and $20000 each month for other expenditures. Tax prepayments for $32000 are made each
quarter beginning in March.
The company%u2019s cash balance at December 31 2010 was $26000 and minimum balance of $25000 must be maintained at all times. Assume that
any short-term financing needed to maintain cash balance would be paid off in the month following the month of financing if sufficient funds are
Interest on short-term loans (12%) is paid monthly. Borrowing to meet estimated monthly cash needs takes place at the beginning of the month.
For example if in the month of April the firm expects to have a need for an additional $60500 these funds would be borrowed at the beginning of April with
interest of $605 (.12 x 1/12 x $60500) owed for April and paid at the beginning of May.
Sales for Capers Inc.:
Prepare a monthly cash budget for Capers Inc. covering the first 7 months of 2010.