Question

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:

	Jan	Feb	Mar
Sales	50,000	52,000	57,000
Production	54,000	49,000	50,000

Cash-related production costs are budgeted at $14 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. $127,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $227,000, which will be paid in February.

All units are sold on account for $19 each. 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 $665,000 ($155,000 from November’s sales and the remaining from December).

Required:

1. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company.                                                                                                    

2. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

Answer 1

Schedule of Budgeted Cash Disbursements
	January	February	March
Production Costs @14 Per Units Produced	756,000	686,000	700,000
Payment of Production Costs:
40% same month	302,400	274,400	280,000
60% Next Month		453,600	411,600
Selling & Admin Exp.	127,000	127,000	127,000
Payment of Accounts Payables		227,000
Total Budgeted Cash Disbursements	429,400	1,082,000	818,600

Schedule of Budgeted Cash Receipts
	January	February	March
Sales @ 19	950,000	988,000	1,083,000
Collection of Receivables:
Same month 60%	570,000	592,800	649,800
1 month after sales 20%		190,000	197,600
2 month after sales 20%			190,000
From Nov Sales	155,000
From Dec Sales	255,000	255,000
Total Budgeted Cash Receipts	980,000	1,037,800	1,037,400