Question

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows: Sales 50.000.000 1.000 Production 54.000 48,000.00 Cash-related production costs are budgeted at S11 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. S115,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $215,000, which will be paid in February All units are sold on account for $16 cach. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale. On January 1 accounts receivable totaled S650,000 (S130,000 from November's sales and the remaining from December). Required: 3. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company (5 marks) 4. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company (5 marks)

sales of january -50,000

feb- 52000

march - 57000

production of jan- 54000

feb- 49000

march- 50000

Answer 1

Cloaks Company Expected Cash Disbursements January February March 54000*11 = 49000*11 50000*11 594000 539000 550000 Production Cost 237600 220000 Cash Disbursement: Production Cost This month (40%) Production Cost Previous month (60%) Selling And Administrative Total Distribution 215600 356400 323400 215000 115000 115000 115000 567600 687000 658400

Production cost of the month is Paid only 40% in the month and 60% is paid in the next month.

Cloaks Company Expected Cash Disbursements January February March 57000 Sales Unit Sales Price Total Sales 50000 16 52000 16 16 800000 832000 912000 130000 0 0 Cash Receipts : November Sales December Sales January Sales February Sales March sales Total Receipts 416000 480000 0 104000 160000 499200 160000 166400 547200 873600 0 0 1026000 763200

Sales Are budgeted 60% in the month of sale and 20% in the next and remaining 20% on the after that month.

Calculation for the month of december :

Accounts Receivable =650000

Less : November's sales = 130000

Remaining = 520000

Sales budgeted for the february = 20% of 520000 = 104000