Question

D AC 436 Assignment Number 2 Watson Company has projected sales and production in units for the second quarter of the coming year as follows: April 55,000 65,000 May June 65,000 55,000 Sales 45,000 55,000 Cash-related production costs are budgetedarsz per unit produced. Of these production costs, 40%are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to S110,000 per month. The accounts payable balance on March 31 totals $193,000, which will be paid in April. All units are sold on account for S 16 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining109 in he second month following the month of sale. Accounts receivable on April 1 totaled $520,000 ($100,000 from February's sales and the remainder from March). Required a) Calculate the budgeted cash disbursements for each month for Watson Company. b) Calculate the budgeted cash receipts for each month for Watson Company.

Answer 1

	a) Calculation of cash disbursement (amount in $ )
		April	May	June
1	Production in units	65,000	55,000	55,000
2	Production costs per unit in $	7	7	7
3	Production costs (1 X 2)	455,000	385,000	385,000
4	Current month paid 40%	182,000	154,000	154,000
5	Balance paid 60%		273,000	231,000
6	Total cash paid from production cost (4+5)	182,000	427,000	385,000
7	Selling and Adminstration over heads	110,000	110,000	110,000
8	Accounts payable (for march and paid in April)	193,000
9	Total cash disbursement (6+7+8)	485,000	537,000	495,000
	b) Calculation of cash Received for watson company (amount in $ )
		April	May	June
1	Sales in units	55,000	45,000	65,000
2	Sales price per unit in $	16	16	16
3	Sales value (1 X 2)	880,000	720,000	1,040,000
4	Current month Received 60%	528,000	432,000	624,000
5	Balance Received 30%		264,000	216,000
6	Balance Received 10%			88,000
7	Total cash Received from Sales (4+5+6)	528,000	696,000	928,000
8	Accounts payable (for march and paid in April)	415000	105000
9	Total cash Received (7+8)	943,000	801,000	928,000
	Workings
	accounts receivables total	520000
	accounts receivables	April	May	June
	Receipts From February sales	100000
	From march sale i.e	315000	105000
	Total receipts from Accounts receivables	415000	105000
	total receivables	520000
	For the month of February sale	100000
	Banlace	420000
	for the April month 420000/40*30	315000
	Balance will be paid in May month i.e	105000
	the 420000 equals to 40%then 30% of 40% will be paid in April and th balance will be paid in the month of May