Question

Question 4 --/1 View Policies Current Attempt in Progress Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: January $50,000, February $75,000. Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,500 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred. I Sales of marketable securities in January are expected to realize $12,000 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000. Prepare a cash budget for January and February. DANNER COMPANY Cash Budget

Answer 1

Cash Budget
	January	February
Beginning Balance	$           45,000	$           27,500
Add : Cash Receipts
Collections from customers	$           85,000	$       1,50,000
Sale of Marketable securities	$           12,000
Total Cash Receipts	$           97,000	$       1,50,000
Cash Available	$       1,42,000	$       1,77,500
Less : Cash Payments
Direct Material	$           50,000	$           75,000
Direct Labor	$           30,000	$           45,000
Manufacturing Overhead	$           19,500	$           23,500
Selling and administrative expenses	$           15,000	$           20,000
Total Cash Payments	$       1,14,500	$       1,63,500
Cash balance before financing	$           27,500	$           14,000
Financing
Borrowing		$             6,000
Repayment
Ending Cash balance	$           27,500	$           20,000

Cash payment for manufacturing overhead = Expense - Depreciation, since it is non cash expense