Reference no: EM132582993

Badger Incorporated is in the process of preparing their budgets for budget period 2018. They are starting to prepare their cash budget. As of December 31, 2017 they are estimating a cash balance on hand of $20,000. Badger Inc. generates only credit sales.

For 2018, they are anticipating the following sales on a monthly basis for the first quarter of 2018:

December 2017 - $500,000

January - $300,000

February - $325,000

March - $400,000

With respect to cash collections, Badger anticipates collections of 70% in the month of sale, and 25% in the following month (with the other 5% uncollectible).

Production costs are expected to be a function of expected credit sales and are expressed as follows:

Direct materials - 40%

Direct labour - 20%

Manufacturing overhead - 15%

• Production costs are 100% paid in the month incurred.
• Selling & administrative expenses are expected to be $50,000 each month.
• Badger Inc. has a policy of maintaining a minimum cash balance of $100,000. Any borrowings to meet this minimum threshold is paid back the first month following borrowing plus 3% interest on principal borrowed.

Question 1: Based on the above information finish a cash budget for each month in the first quarter of 2018 (For any repayments of borrowings you do not need to separate out principal and interest).