Question

1. Carter Company has projected sales and production in units for the second quarter of next year as follows: Sales. Production April May June 60,000 40.000 50.000 50.000 50.000 60.000 | Required: (15%) a. Cash production costs are budgeted at $6 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 (all of which are paid in cash) amount to $120,000 per month. The accounts payable balance on March 31 totals $192,000, all of which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Carter Company. b. Assume that all units will be sold on account for $15 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 remaining 10% in the second month following the month of sale. Accounts receivable on March 31 totaled $510,000 $(90,000 from February's sales and the remainder from March). Prepare a schedule for each month showing budgeted cash receipts for Carter Company.

Answer 1

a.

Cash Disbursements
	April	May	June	Total
Disbursements for Purchases
Paid in same month 40%	$         120,000	$       120,000	$         144,000	$        384,000
Paid in following month 60%	$         192,000	$       180,000	$         180,000	$        552,000
Total Disbursements for Purchases	$         312,000	$       300,000	$         324,000	$        936,000
Selling and administrative expenses	$         120,000	$       120,000	$         120,000	$        360,000
Total Cash Disbursements	$         432,000	$       420,000	$         444,000	$     1,296,000

b.

Cash Collections Schedule
	April	May	June	Total
Cash Collections from February Sales	$           90,000			$           90,000
Cash Collections from March Sales	$         315,000	$       105,000		$        420,000
Cash Collections from April Sales	$         540,000	$       270,000	$            90,000	$        900,000
Cash Collections from May Sales		$       360,000	$         180,000	$        540,000
Cash Collections from June Sales			$         450,000	$        450,000
Total Cash Collections	$         945,000	$       735,000	$         720,000	$     2,400,000