Preparation of cash budget – Sam and Suzy Sizeman need to prepare a cash budget
ID: 2655431 • Letter: P
Question
Preparation of cash budget – Sam and Suzy Sizeman need to prepare a cash budget for the last quarter of 2016 to make sure they can cover their expenditures during the period. Sam and Suzy have been preparing budgets for the past several years and have been able to establish specific percentages for most of their cash outflows. These percentages are based on their take-home pay (that is, monthly utilities normally run 5% of monthly take-home pay). The information in the following table can be used to create their fourth-quarter budget for 2016.
a) Prepare a quarterly cash budget for Sam and Suzy covering the months October through December 2016.
b) Are there individual months that incur a deficit?
c) What is the cumulative cash surplus or deficit by the end of December 2016?
Explanation / Answer
a) Statement showing cash Budget Particulars October November December Total Monthly take home pay 4,900.00 4,900.00 4,900.00 14,700.00 Housing @30% 1,470.00 1,470.00 1,470.00 4,410.00 Utilities @5% 245.00 245.00 245.00 735.00 Food @10% 490.00 490.00 490.00 1,470.00 Transportation @7% 343.00 343.00 343.00 1,029.00 Medical@.5% 24.50 24.50 24.50 73.50 Clothing@3% for Oct and Nov 147.00 147.00 294.00 Clothing for Dec 440.00 440.00 Prpoperty Taxes@11.5% for Nov 563.50 563.50 Appliances @1% 49.00 49.00 49.00 147.00 Personal Care@2% 98.00 98.00 98.00 294.00 Entertainment@6% for Oct and Nov 294.00 294.00 588.00 Entertainment for Dec 1,500.00 1,500.00 Savings@7.5% 367.50 367.50 367.50 1,102.50 Other 5% 245.00 245.00 245.00 735.00 Excess Cash 4.5% 220.50 220.50 220.50 661.50 Remaining Cash 906.50 343.00 (592.50) 657.00 b) Yes In decmber there is a deficit c) Cumulative surplus is of $657 by end of Dec 2016