Question

Business Decision Case The sales department of Donovan Manufacturing, Inc. has completed the following sales forccast for the months of January through March 20X1 for its only two products: 50,000 units of J to be sold at $90 each and 30,000 units of K to be sold at $70 each. The desired unit inventories at March 31, 20X1, are 10% of the next quarter's unit sales forecast, which are 60,000 units of J and 30,000 units of K. The January 1, 20X1, unit inventories were 5,000 units of J and 2,000 units of K. Each unit of J requires 3 pounds of material A and 2 pounds of material B for its manufacturc: K requires 2 pounds of A and 4 pounds of B. The purchase cost of A is $9 per pound and the purchase cost of B is $5 per pound. Materials A and B on hand at January 1, 20X1, were 19,000 pounds of A and 7,000 pounds of B. Desired inventories at March 31, 20X1, are 14,000 pounds of A and 8,000 pounds of B. Each unit of J requires 0.5 hours of direct labor in the factory, cach unit of K requires 1.0 hour of direct labor. The average hourly rate for direct labor is $12 per hour. Estimated manufacturing overhead cost is $6 per direct labor hour plus $90,000 per month. Selling and administrative expenses are estimated to be 10% of sales revenue plus $180,000 per month Cash sales for the first quarter are estimated to be $300,000 per month. It is forecast that 30% of the credit sales for the quarter ended March 31, 20X1, will occur in January, 30% in February, and 40% in March. Of credit sales (December through March), 40% will be collected as cash in the month of sale and 55% will be collected in the following month. The remainder will be uncollectible. Cash collected in January 20X1 from December 20X0 sales will be $1,050,000. The January 1, 20X1, cash balance was $70,000. The minimum acceptable cash balance at the end of each month is $60,000. Short-term borrowings (6-month term) are made in multiples of $10,000. Interest is charged at the rate of 1% per month on short-term borrowings. The first interest payment is made the month following the borrowing. Cash disbursements (excluding interest on short-term borrowings) are estimated as follows: January February March Manufacturing costs ....... Selling and administrative expenses ....... Interest expense...... Income tax payment.......... $1,500,000 390,000 90,000 $1,300,000 410,000 90,000 $1,400,000 400,000 90,000 210,000 Capital expenditures................ 124,000 110,000 50,000 Cash dividends. 300,000 0

A-F for reference. Just need help with G & H.

Answer 1

Total sales 6,600,000 Cash sales ( $ 300,000 x 3 months) 900,000 Credit sales (Total sales - Cash sales ) 5,700,000 Jan Credit sales = 30% of Quarter Credit sales = $ 5,700,000 x 30% = $ 1,710,000 Feb Credit sales = 30% of Quarter Credit sales = $5,700,000 x 30% = $ 1,710,000 Mar Credit sales = 40% of Quarter Credit sales = $ 5,700,000 x 40% = $ 2,280,000 Schedule of cash collected from the customers For the Quarter Ended March 31, 20x1 January February 300,000 $ 300,000 March $ $ 300,000 1,050,000 684,000 $ $ Cash sales Credit sales December January February March Total Credit sales Total sales 940,500 684,000 $ 940,500 912,000 1,852,500 2,152,500 1,734,000 2,034,000 $ $ 1,624,500 1,924,500 $ $ 40% of Current month Credit sales 55% of Last month Credit sales

Cash budget For the Quarter Ended March 31, 20x1 January 70,000 $ March February 60,000 $ 70,900 Beginning Cash balance (a) Cash receipts : Cash sales Cash from Current month credit sales Cash from Last month credit sales Cash available (b) 300,000 684,000 1,050,000 2,104,000 $ $ $ $ 300,000 $ 684,000 $ 940,500 $ 1,984,500 $ 300,000 912,000 940,500 2,223,400 1,300,000 $ 410,000 $ 90,000 $ Cash disbursements: Manufacturing costs Selling and administrative expenses Interest expenses Income tax payment Capital expenditures Cash dividends Total disbursements: (c) Estimated cash ending balance (d) = a +b-C 1,500,000 $ 390,000 $ 90,000 $ - $ 124,000 $ 300,000 $ 2,404,000 $ (300,000) $ 1,400,000 400,000 90,000 210,000 50,000 110,000 $ $ 1,910,000 74,500 $ $ 2,150,000 73,400 Minimum cash end balance (e) 60,000 Short term borrowings (f) = (d) - (d) 360,000 $ Interest on short term borrowings (g) = (f) x 1% $ 3,600 $ 3,600 Cash Ending balance (h) = a + b-c+f-g $ 60,000 $ 70,900 $ 69,800