Question: suppose a company has an info processing division that provides...

Suppose a company has an Info Processing Division that provides database management services

for the professional photographers who buy its frames. The division uses state-of-the-art

equipment and employs five information specialists. Each specialist works an average of 160

hours a month. The division's controller has compiled the following information:

Actual Data for Year

Forecasted Data for Year

November

December

January

February

March

Client billings (sales)

$ 25,000

$ 35,000

$25,000

$20,000

$40,000

Selling & administrative expenses

$ 12,000

$ 13,000

$12,000

$11,000

$12,500

Operating supplies

$ 2,500

$ 3,500

$ 2,500

$ 2,500

$ 4,000

Processing overhead

$ 3,200

$ 3,500

$ 3,000

$ 2,500

$ 3,500

Of the client billings, 60 percent are collected during the month of sale, 30 percent are collected

in the first month following the sale, and 10 percent are collected in the second month following

the sale. Operating supplies are paid for in the month of purchase. Selling and administrative

expenses and processing overhead are paid in the month following the cost's incurrence.

The division has a bank loan of $12,000 at a 12 percent annual interest rate. Interest is paid

monthly, and $2,000 of the loan principal is due on February 28th of next year. Income taxes

of $4,550 for this calender year are due and payable on March 15 of next year. The information

specialists earn $8.50 an hour, and all payroll-related employee benefit costs are included in

processing overhead. The division anticipates no capital expenditures for the first quarter of the

coming year. It expects its cash balances on December 31 of this year to be $13,840.

Required

Prepare a monthly cash budget for the Info Processing Division for the three-month period

ending March 31 of next year. Include each month of the quarter and a quarter total column.

Comment on whether the ending cash balances are adequate for the division's needs.