Jodie Products Limited is a merchandising company that sells stationery and other school supplies. The company is planning its cash needs for 2014/2015. In the past Jodie Products had to borrow money in order to support peak sales of back-to-school material, which occur during January. The following information has been provided to assist in preparing a cash budget for the period:

 

Budgeted monthly income statement for December 2014 to March 2015
Â	December	January	February	March
Â	N$	N$	N$	N$
Sales	40 000	70 000	50 000	45 000
Cost of sales	24 000	42 000	30 000	27 000
Gross margin	16 000	28 000	20 000	18 000
Operating expenses	Â	Â	Â	Â
Selling expenses	7 200	11 700	8 500	7 300
Administrative expenses	5 600	7 200	6 100	5 900
Net income	3 200	9 100	5 400	4 800

 

Note the following additional information:

• Administrative expenses include N$2 000 depreciation each month.

• 20 % of sales are cash sales. Credit sales are collected over a three-month period in the ratio of 10% in the month of sale; 70% in the month following sale and 20% in the second month following sale. October sales amounted to N$30 000, and November sales to N$36 000.

• Inventory purchases are paid for within 15 days. Therefore 50% of a month’s inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month.

• Purchases amount to 75% of the following month’s sales.

• Dividends of N$1 000 will be declared and paid in February.

• The cash balance on 30 November was N$8 000. The company must maintain a cash balance of at least N$8 000 at all times.

• The company can borrow cash from the bank as needed. Loans are received in multiples of N$1 000. Interest paid on loans are 15% per annum, payable monthly.

Prepare a cash budget for December, January and February. When will Jodie products be able to repay the loan?