Question & Answer: Question 3 Prepare cash budget from financial statements The Red Bean Company processes and distributes beans. The beans are packed…..

Question 3 Prepare cash budget from financial statements The Red Bean Company processes and distributes beans. The beans are packed in 500 gram-plastic bags and sold to grocery chains for $0.50 each in boxes of 100 bags. During March the entity anticipates selling 16 000 boxes (sales in February were 14 000 boxes). Typically, 80 per cent of the entity’s customers pay within the month of sale, 18 per cent of the customer pay the month after, and 2 per cent of sales are never collected. The entity buys beans from local farmers. The farmers are paid S0.20 per 500 grams, cash. Most of the processing is done automatically. Consequently, most ($80 000) of the entity’s factory overhead is depreciation expense. The entity advertises heavily. For March managers expect to publish $75 000 worth of advertisements in popular magazines. This amount is up from February’s $60 000. The entity pays for 10 per cent of its advertising March’s budgeted income statement and statement of cost of goods manufactured and sold follow. All costs and expenses are paid for as incurred unless specifically indicated otherwise. The entity will begin March with a cash balance of $25 000, and pays a monthly dividend of $15 000 to the owners. in the month the advertisements are run and 90 per cent in the following month. Statement of profit or loss $800000 540000 260000 80000 69 000 75000 16000 $ 20000 Cost of sales Gross margin Administrative salaries Sales commissions Bad debts expense Operating income Statement of cost of goods manufactured and sold 20000 Beginning balance direct materials Direct materials purchases Materials available for use Ending balance direct materials Direct materials used Labour costs incurred Overhead costs 320000 90000 115000 525000 45000 570000 30000 $540000 Cost of good manufactured Beginning finished goods balance Goods available for sale Ending finished goods balance Cost of sales Required From the information provided, prepare a cash budget for March.