Question

Cash Disbursement Timber Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Lumber purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 15 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the month of sale. Additionally, a monthly lease payment of $44,000 is paid for computer services. Sales revenue is forecast as follows Month Sales Revenue February $200,000 March 240,000 April 250,000 May 290,000 June 270,000 July 310,000 Required Prepare a schedule of cash disbursements for April, May, and June. Do not use a negative sign with your answers. Timber Company Schedule of Cash Disbursements April, May, and June April May June Lumbers purchases $ 250,000 X $ 290,000 x $ 270,000 X Wages 203,000 x Operating expenses 37,500 x Lease payment 12,000 x Total disbursements $ 277,500 x $ ох 0 X 0 X Check

Answer 1

Cash budget relates to forecasts of inflows and outflows during a particular period. Cash disbursements relate only to the outflows. Cash disbursement schedule helps to formulate management decisions and strategies

Timber company

Schedule of cash disbursements

Cash Disbursements	April	May	June
Lumber purchases	$          203,000	$          189,000	$          217,000
Wages	$            37,500	$         43,500	$         40,500
operating expenses	$         24,000	$         25,000	$         29,000
Lease payments	$         44,000	$         44,000	$         44,000
Total disbursements	$          308,500	$          301,500	$          330,500

Working Note :

	February	March	April	May	June	July
Sales revenue	$          200,000	$          240,000	$          250,000	$          290,000	$          270,000	$          310,000
Cost of goods sold at 70%	$          140,000	$          168,000	$          175,000	$          203,000	$          189,000	$          217,000
Cash Disbursements
Lumber payments paid one early	$          168,000	$          175,000	$          203,000	$          189,000	$          217,000
Wages at 15% of sales	$            30,000	$         36,000	$         37,500	$         43,500	$         40,500	$             46,500
Other operating costs at 10% of sales paid next month	-	$         20,000	$         24,000	$         25,000	$         29,000	$             27,000
Lease payments	$         44,000	$         44,000	$         44,000	$         44,000	$         44,000	$             44,000
Total disbursements	$          242,000	$          275,000	$          308,500	$          301,500	$          330,500	$          117,500

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