MA45 Problem: Budgeting – City of Jimmytown

MA45 Problem: Budgeting – City of Jimmytown

The City of Jimmytown had the following sales of water for the last half of 20x9.MonthJulyAugustSeptember October  November December 

Sales Revenue$100,00090,000120,00085,000140,000100,000

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All sales are on credit. Historically, 50 percent is collected in the month of the sale, 35 percent duringthe first month following the sale, and 15 percent in the second month following the sale.

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Cost of water averages 75 per cent of sales revenue. Water is purchased in month of sale. All purchases are paid during the month following the purchase.

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Operating costs of $20,000 are paid each month.

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The September 1 cash balance is expected to be the minimum balance of $10,000.

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The minimum acceptable cash balance at the end of any month is $10,000. Money can be borrowedfrom a local bank in increments of $1,000. (Do not include interest charges in your budget.)

 Required -

Prepare monthly a cash budget for September, October, and November, 20x9, and an overall cash budgetfor the three months together