Question

Exercise 22-14 (Video) Cullumber Company expects to have a cash balance of $56,250 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $106,250, February $187,500. Payments for direct materials: January $62,500, February $93,750. Direct labor: January $37,500, February $56,250. Wages are paid in the month they are incurred. Manufacturing overhead: January $26,250, February $31,250. These costs include depreciation of $1,875 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $18,750, February $25,000. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $15,000 in cash. Cullumber Company has a line of credit at a local bank that enables it to borrow up to $31,250. The company wants to maintain a minimum monthly cash balance of $25,000. Prepare a cash budget for January and February.

Answer 1

Cullumber company
Cash Budget
	Jan.	Feb
Cash Balance Beginning	56,250	34,375
Add Cash Collections	1,06,250	1,87,500
Proeeds from sale of securities	15,000
Total Cash Available	1,77,500	2,21,875
Less Cash Disburtments:
Inventory Purchases	62,500	93,750
Direct Labour	37,500	56,250
Manufacturing Overhead	24,375	29,375		Manufacturing Overhead	26250 - 1875	31250 - 1875
Selling and adm. Expenses	18,750	25,000
Total Cash Disbursement	1,43,125	2,04,375
Excess (deficiency) of cash	34,375	17,500
Financing:
Borrowings		7500
Repayments
Interest
Total Financing	0	7500
Cash Balance, Ending	34,375	25,000