# Cyrus Brown manufacturing — CBM

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## Description

Cyrus Brown manufacturing — CBM
To avoid any uncertainty regarding his businessâ€™ financing needs at the time when such needs may arise, Cyrus Brown wants to develop a Cash Budget for his latest venture- Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next nine months:
March 2004 \$250,000Â
April 275,000Â
May 320,000Â
June 450,000Â
July 575,000Â
August 700,000Â
September 825,000Â
October 350,000Â
November 285,000Â

He has also gathered the following collection estimates regarding the forecast sales: Collection within the month of sale, 10%; collection the month following sales, 65%, and collection the second month following sales, 25%. Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:
March 2004 \$187,500Â
April 206,250Â
May 240,000Â
June 337,500Â
July 431,250Â
August 525,000Â
September 618,750Â
October 262, 500Â

Administrative salaries will approximately amount to \$35,000 a month; lease payments around \$15,000 a month; depreciation charges, 15,000 a month; a one-time new plant investment in the amount of \$95,000 is expected to be incurred and paid in June; income tax payments estimated to be around \$ 55,000 will be due in both June and September; and finally, miscellaneous costs are estimated to be around \$10,000 a month. Cash on hand on March 1 will be around \$50,000; and a minimum cash balance of \$50,000 shall be on hand at all times.

a. Prepare a monthly cash budget for Cyrus Brown Manufacturing for the nine month period, March through November.

b. Based on your findings in part b, will the company need any outside financing?
c. What is the minimum line of credit that CBM will need?
d. What do you think of CBMâ€™s cash position during the budget period? Do you see any concerns for the company in this regard?
e. If you were a bank manager would you want CBM as your client? Why or why not?

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# Cyrus Brown Manufacturing (CBM)

\$32.00

Category:

## Description

To avoid any uncertainty regarding his business’ financing needs at the time when such needs may arise, Cyrus Brown wants to develop a cash budget for his latest venture: Cyrus Brown Manufacturing (CBM). He has estimated the following sales forecast for CBM over the next 9 months:

March \$100,000
April \$275,000
May \$320,000
June \$450,000
July \$700,000
August \$700,000
September \$825,000
October \$500,000
November \$115,000
He has also gathered the following collection estimates regarding the forecast sales:

Payment collection within the month of sale = 25%
Payment collection the month following sales = 55%
Payment collection the second month following sales = 20%
Payments for direct manufacturing costs like raw materials and labor are made during the month that follows the one in which such costs have been incurred. These costs are estimated as follows:

March \$187,500
April \$206,250
May \$375,000
June \$337,500
July \$431,250
August \$640,000
September \$395,000
October \$425,000
Additional financial information is as follows:

Administrative salaries will approximately amount to \$35,000 a month.
Lease payments around \$15,000 a month.
Depreciation charges, \$15,000 a month.
A one-time new plant investment in the amount of \$95,000 is expected to be incurred and paid in June.
Income tax payments estimated to be around \$55,000 will be due in both June and September.
And finally, miscellaneous costs are estimated to be around \$10,000 a month.
Cash on hand on March 1 will be around \$50,000, and a minimum cash balance of \$50,000 shall be on hand at all times.
To receive full credit on this assignment, please show all work, including formulas and calculations used to arrive at the financial values.

Group Project Guidelines:

As a group, prepare a monthly cash budget for Cyrus Brown Manufacturing for the 9-month period of March through November.
Use Microsoft Excel to prepare the monthly cash budget.