How do I even start?
Juan's Taco Company has restaurants in five college towns. Juan wants to expand into Austin and College Station and needs a bank loan to do this. Mr. Bryan, the banker,will finance construction if Juan can present an acceptable three-month financial plan for January through March. Following are actual and forecasted sales figures:
Actual Forecast Additional Information
November
$120,000
January
$190,000
April forecast
$230,000
December
140,000
February
210,000
March
230,000
Of Juan's sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are paid for in cash. Labor expense is 50 percent of sales and is also paid in the month of sales. Selling and administrative expense is 5 percent of sales and is also paid in the month of sales. Overhead expense is $12,000 in cash per month; depreciation expense is $25,000 per month. Taxes of $20,000 and dividends of $16,000 will be paid in March. Cash at the beginning of January is 70,000, and the minimum desired cash balance is $65,000.
For January, February, and March, prepare a schedule of monthly cash receipts,monthly cash payments, and a complete monthly cash budget with borrowings and repayments.
