Sherman Company has a cash balance on January 1 of $123,484. Given the following

Question

Sherman Company has a cash balance on January 1 of $123,484. Given the following data, compute Sherman’s budgeted cash balance on March 31. Round all amounts to the nearest dollar.
Past and budgeted future activity, in $000:
Sales Operating expense

November 1,526 425
December 1,491 400
January 1,388 408
February 1,295 395
March 1,456 416
April 1,422 399

Sherman has a gross profit of 40%, and has a policy of maintaining an inventory of 150% of expected next-month sales. Operating expenses are paid 80% in the current month, and 20% in the following month. Purchases of merchandise are paid for 50% in the current month, and 50% in the following month. All sales are on credit. Normal pattern of collections is: 40% in month of sale, 46% in following month, 10% in next following month, 4% uncollectible.

Explanation / Answer

Answer: Budgeted cash balance om March 31, is ($854576). The detailed working is given below: CASH BUDGET Particulars MONTHS Nov Dec Jan Feb Mar April Sales in Dollars 526000 491000 388000 295000 456000 422000 Collections Nov Bill 210400 241960 52600 Dec Bill 196400 225860 49100 Jan Bill 155200 178480 38800 Feb Bill 118000 135700 29500 Mar Bill 182400 209760 Total Collected 210400 438360 433660 227580 38800 Ending Inventory 294600 232800 177000 273600 253200 Cost of goods sold 210400 196400 155200 118000 182400 168800 Total Inventory required 505000 429200 332200 391600 435600 Beginning Inventory 294600 232800 177000 273600 Purchase of Material 505000 134600 99400 214600 162000 Operating expense 425000 400000 408000 395000 416000 399000 Beging_Cash_Balane 123484 33744 -293276 Collection of Sales 210400 438360 433660 227580 38800 0 Total Cash Available 210400 438360 557144 261324 -254476 0 Less: Payments Payment of Direct Material #VALUE! 319800 117000 157000 188300 81000 Operating expense #VALUE! 405000 406400 397600 411800 402400 Variable Operating expense 0 Fixed Mfg Overhead Fixed Non-Mfg Costs Total Payments #VALUE! 724800 523400 554600 600100 483400 Ending Cash Balance 33744 -293276 -854576 -483400

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