Below is the monthly sales data of Sunshine Co. (a merchandiser) in the first quarter of 2021: Month Sales ($) 70,000 Jan Feb 80,000 Mar 100,000 Additional information is as follows: 1. Sunshine expects a 10% increase in sales in the first quarter of 2022 compared to 2021. 2. Average purchases in 2021 were 60% of sales and is expected to remain the same in 2022. 3. Sunshine has the following cash collection pattern from its customers: 20% in the month of sale and the remaining in the month following the sale. 4. 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. 5. In 2022, it is budgeted that labor costs amounted to 15% of sales. Other operating costs are $35,000 per month (including $10,000 depreciation). Both labor and other operating costs are paid in the month incurred. 6. Suppose the cash balance at the end of January 2022 was $9,000. Sunshine has a policy of maintaining a monthly minimum cash balance of $4,000. If needed, money can be borrowed in multiples of $500. Required: 1. Prepare Sunshine's sales and purchases budget for the first quarter of 2022. Provide all necessary calculation. (5 points) 2. Prepare Sunshine's cash budget for February and March 2022. Provide all necessary calculation. (20 points) 3. What suggestions can you give to Victory to improve their cash flow? Explain your answer. (5 points)
