Question

Marigold Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January $380,160 126,720 95,040 73,920 83,424 February $422,400 132,000 105,600 79,200 89,760 All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60% of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,056 of depreciation per month. Other data: 1. 2. 3. Credit sales: November 2016, $264,000; December 2016, $337,920. Purchases of direct materials: December 2016, $105,600. Other receipts: January-Collection of December 31, 2016, notes receivable $15,840; February—Proceeds from sale of securities $6,336. Other disbursements: February–Payment of $6,336 cash dividend. 4. The company's cash balance on January 1, 2017, is expected to be $63,360. The company wants to maintain a minimum cash balance of $52,800.

Answer 1

(1) Expected cash collection from customers
	January ($)	February ($)
November	$      52,800
December	$    101,376	$        67,584
January	$    190,080	$      114,048
February		$      211,200
Total collections	$    344,256	$      392,832
(2) Expected Payments for Direct Materials-
	January ($)	February ($)
December	$      42,240
January	$      76,032	$        50,688
February		$        79,200
Total payments	$    118,272	$      129,888

(1) Expected cash collection from customers
	January ($)	February ($)
November	=264000*20%
December	=337920*30%	=337920*20%
January	=380160*50%	=380160*30%
February		=422400*50%
Total collections	=SUM(B4:B7)	=SUM(C4:C7)
(2) Expected Payments for Direct Materials-
	January ($)	February ($)
December	=105600*40%
January	=126720*60%	=126720*40%
February		=132000*60%
Total payments	=SUM(B13:B15)	=SUM(C13:C15)