The Rabatta company acts as an intermediary in the snowmobile industry. It purchases its inventory directly from manufac

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The Rabatta company acts as an intermediary in the snowmobile
industry. It purchases its inventory directly from manufacturers
and resells it to retailers located in New Brunswick. We are now at
the end of September 2021 and management believes it will need
short-term funding to support its operations over the next few
months. Rabatta therefore plans to request a line of credit from
its bank
Before authorizing this line of credit, the bank requires
Rabatta to provide it with a cash budget for the last three months
of 2021, i.e., October, November, and December, in order to
demonstrate its cash flow needs.
Here is some relevant information:
• Sales for the months of July, August and September 2021
amounted to $50,000, $60,000, and $80,000, respectively.
• Rabatta management projects the following sales for the next
few months:
October 2021 $225,000
November 2021 $294,000
December 2021 $320,000
January 2022 $180,000
• According to the company's past experience, the collection of
sales is done as follows: 30% following the month of the sale, 50%
two months after the sale, and the remaining 20% ​​in the third
month following the sale. sale. All sales are made on credit to
established customers.
• The cost of sales represents 80% of sales. Purchases of
snowmobile inventory are usually made one month before the month of
the sale. Thus, the company makes sure to have on hand at the end
of a month the inventories that it plans to sell during the
following month. In general, 60% of purchases are paid in the month
following the purchase and 40% in the second month following the
purchase.
• Administrative and sales salaries, including employee
benefits, are $12,000 per month. Additionally, the company pays a
2% commission of sales to sellers. This commission is paid in the
month of the sale.
• Rabatta plans to purchase a service truck in October at a cost
of $35,000. This amount will be financed by the concessionaire.
Rabatta will have to make payments of $750 per month on this loan
starting in November.
• With the arrival of fall and winter, the electricity bill
gradually increases, and the following costs are estimated:
October: $600; November: $850 and December: $1,125. These fees are
paid the month following the month of use. Electricity usage for
the month of September was $425.
• Other business operating expenses remain at $3,000 per
month.
• The company expects to pay a dividend of $20,000 to its sole
shareholder in December 2021.
• Depreciation expense is $4,000 per month.
• The company has a cash balance of $65,000 as of September 30,
2021.
• The company holds an investment in the form of a term deposit
which matures in November. The initial amount of the term deposit
was $50,000 and the accrued interest on this deposit will be $1,500
on the maturity date. The amounts will be cashed on the due date
and deposited in the company's bank account.
Work to do:
Prepare a disbursement budget for purchases for the last three
months of 2021. (You must demonstrate the details of all your
calculations)