For YOURlecturer only

Blueline Printing's board of directors was presented with the following information about operations for an upcoming three-month period. The board desires to declare a dividend at the end of June, but still maintain cash on hand of $250,000. Blueline began April with $75,000 of cash on hand. Prepare a cash budget, and determine how much cash will be available for the dividend. Is there any apparent risk associated with the dividend plan?

April May June

Customer receipts $ 700,000 $ 750,000 $ 800,000

Cash paid for direct materials 200,000 222,000 265,000

Cash paid for direct labor 245,000 265,000 300,000

Factory overhead* 140,000 145,000 154,000

SG&A** 86,000 89,000 83,000

Taxes 15,000 18,000 16,000

Equipment purchase*** 500,000

* Includes monthly depreciation of $100,000 ** Includes monthly depreciation of $25,000 *** Equipment purchase to be paid for in July

Cash budgeting and decision making B-21.09

Spreadsheet f x

A B C D E F G

1

2 Cash Budget

3

4 April May June

5 Beginning cash balance $ 75,000

6 Customer receipts 700,000

7 Available cash $775,000

8 Less disbursements:

9

1 0

1 1

1 2

1 3

1 4

1 5

1 6 Ending cash balance

1 7

Sales Production Materials Labor Factory Overhead Finished Goods SG&A Cash Income

Cash budgeting and decision making B-21.09