Presented below are selected budget data items for Globe Corporation for a three-month period:
OCTOBER NOVEMBER DECEMBER
Sales $960,000 $870,000 $850,000
Direct materials $123,000 $119,000 $125,000
Direct labor $90,000 $85,000 $96,000
Variable overhead $65,600 $62,400 $68,000
Fixed overhead $140,000 $140,000 $140,000
Selling and admin. costs $312,000 $310,000 $315,000
Fixed loan payments $140,000 $140,000 $140,000
Sales were $770,000 in August and $840,000 in September. Material usage was $115,000 in August and $118,000 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 40% in the month used and 60% the following month. All other expenses are paid in the month incurred. The cash balance was $35,000 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.