Sales forecast: January: 5,100 units; February: 6,900 units; March: 7,300 units;

Question

Sales forecast: January: 5,100 units; February: 6,900 units; March: 7,300 units; April: 7,500 units. The unit sales price is $49. All sales are on credit and collections are 30% in the month of sale and 70% the following month. Accounts receivable as of December 31, 2015 is $18,000 and this amount is expected to be collected in January 2016. 2. End of month inventory must equal 30% of next month’s sales. The inventory at the end of December 2015 was 1,530 units. 3. The following are the expected costs for direct materials, direct labor and manufacturing overhead: DM DL Overhead January $12/unit $15/unit $7,500 + $2.60 per unit produced February $12/unit $15/unit $7,500 + $2.60 per unit produced March $12/unit $15/unit $7,500 + $2.60 per unit produced A. Direct materials are paid 40% in the month incurred and 60% in the following month. Account payable for materials as of December 31, 2015 is $5,100; this amount will be paid in January 2016. B. Direct labor is paid in the month incurred. C. Overhead costs are paid in the month incurred. Fixed overhead includes depreciation of $5,500 per month. 4. Selling costs are sales commissions: $2.10 per unit sold; shipping costs: $0.50 per unit sold. Administrative costs per month are: salaries: $15,000; rent: $2,000; depreciation: $1,900. All costs are paid in month incurred. 5. The company plans to buy equipment costing $19,000 in January and to pay dividends of $35,000 in March 6 . (NUMBER 7) The cash balance as of December 31, 2015 is $25,000. The company requires a minimum cash balance of $2,000. The company has a revolving credit with US Bank to borrow in increments of $1,000 at the beginning of each month at interest of 12% annual rate. The company may borrow any amount at the beginning of any month and repays its loans, or any parts of its loans, at the end of any month. Interest payments are due on any principle at the time it is repaid (the amount repaid does not have to be in increments of $1,000). For simplicity, assume that interest is not compounded. As of December 31, 2015 the company has no outstanding loans. Required: Based on the information given, prepare the following budget for each month of the first quarter of 2016 and the quarter totals: Cash Budget. (I just need help with number 7)..i need help with the principle and the interest.

Explanation / Answer

Cash Receipts Schedule Cash Receipts January February March Sales(units) 5100 6900 7300 Sale Price $49 $49 $49 Sales in Value $249,900 $338,100 $357,700 Collections From December Sales $18,000 From January Sales $74,970 $174,930 From February Sales $101,430 $236,670 From March Sales $107,310 Total Cash Rfeceipts $92,970 $276,360 $343,980 Purchases January February March April Sales Units 5100 6900 7300 7500 Beginning Inventory 1530 2070 2190 Purchases(Units) 5640 7020 7360 Unit Produced 7170 9090 9550 Clossing Inventory 2070 2190 2250 Materials Cost $12 $12 $12 Purchases(Value) $67,680 $84,240 $88,320 Unit Labour Cost $15 $15 $15 Direct labour $107,550 $136,350 $143,250 Cash Badget for First Quarter 2016 Cash Budget January February March Cash Balance at Beginning $25,000 $2,346 $2,428 Cash Receipts $92,970 $276,360 $343,980 Total Cash Available $117,970 $278,706 $346,408 Disbursements Purchases Previous Month(60%) $5,100 $40,608 $50,544 Current Month(40%) $27,072 $33,696 $35,328 Direct Labour $107,550 $136,350 $143,250 Overhead-Fixed(Less Depreciation) $2,000 $2,000 $2,000 Overhead-Variable $18,642 $23,634 $24,830 Selling Costs $     10,710 $ 14,490 $ 15,330 Shipping Cost $        2,550 $     3,450 $     3,650 Salaries $15,000 $15,000 $15,000 Rent $2,000 $2,000 $2,000 Equipment $19,000 0 0 Dividend $35,000 Total Disbursements $209,624 $271,228 $326,932 Excess / Deficiency of Cash available over Disbursements ($91,654) $7,478 $19,476 Financing Borrowing at The Beginning $94,000 Payments at the beginning 0 $5,000 17000 Interest 0 $50 $340 Total financing $94,000 $5,050 $17,340 Cash Balance Ending $2,346 $2,428 $2,136 Interest Calculation on Prinicipal 5000*12%*1/12 $        50.00 17000*12%*2/12 $     340.00

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