Question

Danner Company expects to have a cash balance of $49,950 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $94,350, February $166,500 Payments for direct materials: January $55,500, February $83,250. Direct labor: January $33,300, February $49,950. Wages are paid in the month they are incurred. Manufacturing overhead: January $23,310, February $27,750. These costs include depreciation of $1,665 per month. All other overhead costs are pa as incurred. Selling and administrative expenses: January $16,650, February $22,200. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $13,320 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $27,750. The company wants to maintain a minimum monthly cash balance of $22,200.

Answer 1

DANNER COMPANY Cash Budget For The Month of January and February January February Beginning cash balance $ 49,950 $ 30,525 Add: Cash reciepts Collections from customers $ 94,350 $ 166,500 Proceeds from sale of securities $ 13,320 Total cash reciepts $ 107,670 $ 166,500 Total cash available $ 157,620 $ 197,025 Less: Cash disbursements Payments for purchases $ 55,500 $ 83,250 Direct labor 33,300 $ 49,950 Manufacturing overhead $ 21,645 $ 26,085 ($ 23,310 - $1,665) & ($ 27,750 - $ 1,665) Selling & administrative expense $ 16,650 $ 22,200 Total cash disbursements 127,095 $ 181,485 Excess or (Deficiency) of cash 30,525 $ 15,540 Financing Add: Borrowing - $ 6,660 (refer note below) Less: Repayment $ Ending cash balance $ 30,525 $ 22,200 $ $ Note: Borrowing of $ 6,660 need to be considered to maintain a minimum cash balance of $ 22,200 in the month of February, it is also assumed that the borrowings can be for made for any amount.