Question

Your answer is partially correct. Try again Danner Company expects to have a cash balance of $59,040 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows. Collections from customers: January $111,520, February $196,800. Payments for direct materials: January $65,600, February $98,400. Direct labor: January $39,360, February $59,040. Wages are paid in the month they are incurred Manufacturing overhead: January $27,552, February $32,800. These costs include depreciation of $1,968 per month. All other overhead costs are paid as incurred Selling and administrative expenses: January $19,680, February $26,240. These costs are exclusive of depreciation. They are paid as incurred Sales of marketable securities in January are expected to realize $15,744 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $32,800. The company wants to maintain a minimum monthly cash balance of $26,240. Prepare a cash budget for January and February. (Do not leave any answer field blank. Enter 0 for amounts.)

Answer 1

Cash Budget For the Two Months Ending February 28, 2017 January February Beginning Cash Balance $ 59,040$ 36,080 Add: Receipts Collectiosn from Customers $ 1,11,520 $ 1,96,800 Sale of Marketable Securities $ 15,744 $ Total Receipts $ 1,27,264 $ 1,96,800 Total Available Cash (A) $ 1,86,304 $ 2,32,880 Less: Disbursements Direct Materials 65,600 $ 98,400 Direct Labor $ 39,360 $ 59,040 Manufacturing Overhead 25,584 $ 30,832 Selling and Administrative Expenses $ 19,680 $ 26,240 Total Disbursements (B) $ 1,50,224 $ 2,14,512 Excess(Deficiency)/Available Cash Over Cash Disbursements (A-B) $ 36,080 $ 18,368 Financing Add: Borrowings 7,872 Less: Repayments Ending Cash Balance $ 36,080 $ 26,240 $

Workings: Manufacturing Overhead: For January = Total Manufacturing Overhead - Depreciation per month = 27,552 - 1,968 = $ 25,584 For February = Total Manufacturing Overhead - Depreciation per month = 32,800 - 1,968 = $ 30,832 Borrowings: For February = Required Minimum Cash Balance - Excess cash available = 26,240 - 18,368 = $ 7,872