Question

Tom and Lynda also inform you that the monthly individual membership fee is $100and that the monthly family membership fee is $160. Hercules offers a 10% discount if amember pays the entire year’s fee in a lump sum. About 180 individuals and 60 families takeadvantage of this offer – these numbers are spread evenly throughout the year. Herculespays for 60% of its purchases during the month of the purchase, and the remainder thenext month. Other variable costs (paid in cash) amount to $25 per month for each individualmembership and $45 per month for each family membership. Hercules also incurs$41,000 (which includes $12,500 in depreciation) toward fixed costs each month. Finally,Tom and Lynda inform you that they have to pay $20,000 toward the purchase of newequipment in September, and that they take out $15,000 each month as their profit. Finally,Hercules began September with a cash balance of $6,000.Required:What is Hercules’ cash budget for September?

Answer 1

Answer:

Net Cash $2,170

Explanation:

Cash Budget for September:

Beginning Balance $6,000

Individual membership fee revenue $1,350

Family membership fee revenue $720

Less:Variable Cost Individual  ($25 * 15) $375

Less:Variable Cost Family  ($25 * 5) $125

Less:Purchase of Machine $20,000

Less:Fixed cost $41,000

Net Cash $2,170

Individual membership fee revenue

$100 * 90% * 180 = 16,200 per year

16,200 / 12 = 1,350 per month.

Memberships per month = 180/12 = 15

Family membership fee revenue

$160 * 90% * 60 = 8,640 per year

8,640 / 12 = 720 per month.

Memberships per month = 60/12 = 5