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? If so, how much?
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?
Business Homework Solutions
#20123
Monthly cash budget for Cyrus Brown Manufacturing
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? If so, how much?
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?
Questions are attached
The solution prepares the Cash Budget for Cyrus Brown Manufacturing (CBM) on Excel spreadsheet. It also prepares an estimate of the required financing needs (or excess funds) for each month during the budget period and estimates the required financing needs (or excess funds) for each month during the budget period.
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By OTA - Overall OTA Rating
Pushkal Kumar Pandey, MBA - 4.9/5
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- Attached file(s):
- 20123-cash budget.xls
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