To avoid any uncertainty regarding his business’ financing needs at
the time when such needs may arise, Cyrus Brown wants to develop a Cash
Budget for his latest venture- Cyrus Brown Manufacturing (CBM). He has
estimated the following sales forecast for CBM over the next nine
months:
March 2004 - $250,000
April - $275,000
May - $320,000
June - $450,000
July - $575,000
August - $700,000
September - $825,000
October - $350,000
November - $285,000
He has also gathered the following collection estimates regarding the
forecast sales: Collection within the month of sale, 10%; collection the
month following sales, 75%; and collection the second month following
sales, 15%. Payments for direct manufacturing costs like raw materials
and labor are made during the month that follows the one in which such
costs have been incurred. These costs are estimated as follows:
March 2004 - $187,500
April - $206,250
May - $240,000
June - $337,500
July - $431,250
August - $525,000
September - $618,750
October - $262,500
Administrative salaries will approximately amount to $35,000 a month;
lease payments around $15,000 a month; depreciation charges, 15,000 a
month; a one-time new plant investment in the amount of $95,000 is
expected to be incurred and paid in June; income tax payments estimated
to be around $ 55,000 will be due in both June and September; and
finally, miscellaneous costs are estimated to be around $10,000 a month.
Cash on hand on March 1 will be around $50,000; and a minimum cash
balance of $50,000 shall be on hand at all times.
a. Prepare a monthly cash budget for Cyrus Brown Manufacturing for the
nine month period, March through November.
b. Prepare an estimate of the required financing needs (or excess funds)
for each month during the budget period.
c. Based on you findings in part b, will the company need any outside
financing? What is the minimum line of credit that CBM will need?
d. What do you think of CBM’s cash position during the budget period?
Do you see any concerns for the company in this regard?
e. If you were a bank manager would you want CBM as your client? Why or
why not?
Business Homework Solutions
#27754
Cash Budget (Using: Sales Forecast, Collection Estimates); Estimate of Required Financing Needs; Outside Financing
To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a Cash Budget for his latest venture- Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next nine months: {see attachment}
He has also gathered the following collection estimates regarding the forecast sales: Collection within the month of sale, 10%; collection the month following sales, 75%; and collection the second month following sales, 15%. Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows: {see attachment}
Administrative salaries will approximately amount to $35,000 a month; lease payments around $15,000 a month; depreciation charges, 15,000 a month; a one-time new plant investment in the amount of $95,000 is expected to be incurred and paid in June; income tax payments estimated to be around $ 55,000 will be due in both June and September; and finally, miscellaneous costs are estimated to be around $10,000 a month. Cash on hand on March 1 will be around $50,000; and a minimum cash balance of $50,000 shall be on hand at all times.
a. Prepare a monthly cash budget for Cyrus Brown Manufacturing for the nine month period, March through November.
b. Prepare an estimate of the required financing needs (or excess funds) for each month during the budget period.
c. Based on you findings in part b, will the company need any outside financing? What is the minimum line of credit that CBM will need?
d. What do you think of CBM's cash position during the budget period? Do you see any concerns for the company in this regard?
e. If you were a bank manager would you want CBM as your client? Why or why not?
The solution calculates cash budget for CBM
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Pushkal Kumar Pandey, MBA - 4.9/5
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- Plain text response
- Attached file(s):
- 27754-cash budget-CBM.xls
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- Monthly cash budget for Cyrus Brown Manufacturing (CBM) - To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a Cash Budget for his latest venture- Cyrus Brown Manufacturing (CB ...
- Cash Budget for Cyrus Brown Manufacturing (CBM) Prepare a monthly cash budget for Cyrus Brown Manufacturing for the nine month period, March through November. - To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a Cash Budget for his latest venture- Cyrus Brown Manufacturing (CB ...
- Examples of monthly cash budgeting. - Attached, is a post containing an MS Excel spreadsheet containing a Cash Budget for the Cyrus Brown Manufacturing Company, which addresses in particular the area of cash budgeting, and cash budget dev ...
- Prepare a monthly cash budget for Cyrus Brown Manufacturing for the nine month period, March through November. - Need help with the monthly cash budget piece of my assignment To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a ...
- FINANCE CASH BUDGET - PLEASE CHECK ATTACHED TEMPLATE FOR ACCURACY AND USE. To avoid any uncertainty regarding his business' financing needs at the time when such needs may arise, Cyrus Brown wants to develop a Cash Bud ...
