You have decided to prepare a cash budget for the upcoming fourth quarter in order to show management the benefits that can be gained from proper cash planning. You have worked with accounting and other areas to gather the information assembled below. The company sells many styles of bracelets, but all are sold for the same $ 10 price. Actual sales of bracelets for the last three months and budgeted sales for the next six months follow: The concentration of sales in the fourth quarter is due to the Christmas holiday. Sufficient inventory should be on hand at the end of each month to supply 40 % of the bracelets sold in the following month. Suppliers are paid $ 4 for each bracelet. Fifty-percent of a month ' s purchases is paid for in the month of purchase; the other 50 % is paid for in the following month. All sales are on credit with no discounts. The company has found, however, that only 20 % of a month ' s sales are collected in the month of sale. An additional 70 % is collected in the following month, and the remaining 10 % is collected in the second month following sale. Bad debts have been negligible. Monthly operating expenses for the company are given below: Variable expenses: Sales commissions 4 % of sales Fixed expenses: Advertising $ 220,000 Rent $ 20,000 Salaries $ 110,000 Utilities $ 10,000 Insurance $ 5,000 Depreciation $ 18,000 Insurance is paid on an annual basis, in January of each year. The company plans to purchase $ 22,000 in new equipment during October and $ 50,000 in new equipment during November; both purchases will be for cash. The company declares dividends of $ 20,000 each quarter, payable in the first month of the following quarter.
Other relevant data is given below: Cash balance as of September 30 $ 74,000