Signal Florists (SF) operates a retail flower shop. Their sales for October total $5,000. They have projected revenue for the next three months as follows:
SF allows its customers a 3% discount if they pay cash and otherwise allows 30 days credit. Only 10% of their customers take the discount and pay in the month of purchase. The remaining 90% pay in the month following purchase.
Materials (flowers, baskets, etc.) are purchased two months in advance of the month in which they will be sold and their suppliers allow SF to pay for purchases one month after the month of the order. Purchases are estimated at 50% of sales. Other expenses are $4,000 per month and in December, SF must hire part-time help to handle the extra volume of business at a cost of $1,000. The target cash balance is $1,000.
Prepare a cash budget for November, December, and January, assuming that they begin the month of November with $1,000 cash. Assume any end of month deficit is financed to achieve the target end of month cash level. There is no limit as to how high the cash balance can be.

Question

Signal Florists (SF) operates a retail flower shop. Their sales for October total $5,000. They have projected revenue for the next three months as follows:
  SF allows its customers a 3% discount if they pay cash and otherwise allows 30 days credit. Only 10% of their customers take the discount and pay in the month of purchase. The remaining 90% pay in the month following purchase.
Materials (flowers, baskets, etc.) are purchased two months in advance of the month in which they will be sold and their suppliers allow SF to pay for purchases one month after the month of the order. Purchases are estimated at 50% of sales. Other expenses are $4,000 per month and in December, SF must hire part-time help to handle the extra volume of business at a cost of $1,000. The target cash balance is $1,000.
Prepare a cash budget for November, December, and January, assuming that they begin the month of November with $1,000 cash. Assume any end of month deficit is financed to achieve the target end of month cash level. There is no limit as to how high the cash balance can be.

Quizplus · Accepted Answer

The Answer of Signal Florists (SF) operates a retail flower shop. Their sales for October total $5,000. They have projected revenue for the next three months as follows:
  SF allows its customers a 3% discount if they pay cash and otherwise allows 30 days credit. Only 10% of their customers take the discount and pay in the month of purchase. The remaining 90% pay in the month following purchase.
Materials (flowers, baskets, etc.) are purchased two months in advance of the month in which they will be sold and their suppliers allow SF to pay for purchases one month after the month of the order. Purchases are estimated at 50% of sales. Other expenses are $4,000 per month and in December, SF must hire part-time help to handle the extra volume of business at a cost of $1,000. The target cash balance is $1,000.
Prepare a cash budget for November, December, and January, assuming that they begin the month of November with $1,000 cash. Assume any end of month deficit is financed to achieve the target end of month cash level. There is no limit as to how high the cash balance can be.

Signal Florists (SF) Operates a Retail Flower Shop