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ABC Co., Inc. has budgeted sales revenues as follows: June July August Credit sales $150,000 $160,000 $ 170,000 Cash sales 80,000 90.000 75.000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 70% is paid in the month of purchase and 30% in the month following purchase. Budgeted inventory purchases are: June $100,000 July 110,000 August 120,000 The beginning cash balance on July 1 was $55,000. Other cash disbursements budgeted: a) selling and administrative expenses of $48,000 and $50,000 in July and August, respectively, b) dividends of $103,000 will be paid in July, and c) purchase of equipment in August for $60,000 cash. d) Depreciation expense $5,000 each month The company wishes to maintain a minimum cash balance of $55,000 at the end of each month. The company borrows money from the bank at 12% interest if necessary, to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. Assume that borrowed money in this case is for one month. Instructions 1. Prepare separate schedules for expected cash collections from customers 2. Prepare separate schedules for expected cash payments for purchases of inventory. 3. Prepare a cash budget for the months of July and August Question 3: Bader Manufacturing, which produces a single product, has prepared the following standard cost sheet for one unit of the product. Direct materials (10 KG at $8 per KG) $80 Direct labor (2 hours at $20 per hour) $40 During the month of April, the company manufactures 750 units and incurs the following actual costs. Direct materials purchased and used (7,550 KG) $58,512.50 Direct labor (1,515 hours) $31,057.50 Instructions Compute the total, cost, and efficiency variances for materials and labor.

Answer 1

1	Schedule of Expected Cash Collections
		July	August
	Cash sales	90000	75000
	Collection of credit sales for:
	June (40% x $150000)	60000
	July (60% x $160000);(40% x $160000)	96000	64000
	August (60% x $170000)		102000
	Total cash collections	246000	241000
2	Schedule of Expected Cash Payments for Inventory Purchases
		July	August
	Payment for purchases of:
	June (30% x $100000)	30000
	July (70% x $110000);(30% x $110000)	77000	33000
	August (70% x $120000)		84000
	Total cash disbursements	107000	117000
3	Cash Budget
	For the Months of July and August
		July	August
	Beginning cash balance $	55000	55000
	Add collection from customers	246000	241000
	Total cash available	301000	296000
	Less cash disbursements:
	Purchase of inventory	107000	117000
	Selling and administrative expenses	48000	50000
	Dividends	103000	0
	Purchases of equipment	0	60000
	Total cash disbursements	258000	227000
	Excess of cash available over disbursements	43000	69000
	Financing:
	Borrowing	12000	0
	Repayments	0	-12000
	Interest	0	-120
	Total financing	12000	-12120
	Ending cash balance $	55000	56880

Interest = $12000 x 12% x 1/12 = $120

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