Question
A cash budget is being prepared for Hotels Inc for the month of May. The following information has been gathered to assist in preparing the budget:
a. Budgeted sales and production requirements are as follows:
Budgeted Sales |
$ 650,000 |
Production requirements |
|
Raw material to be used |
$ 301,000 |
Direct labour cost |
85,000 |
Month |
Sales |
Accounts |
Percentage |
Percentage to |
receivable at |
of sales |
be collected |
||
April 30 |
Uncollected |
in May |
||
at April 30 |
||||
January |
$ |
$8,500 |
2.5% |
? |
340,000 |
||||
February |
530,000 |
31,800 |
6.0% |
? |
March |
470,000 |
47,000 |
10.0% |
? |
April |
550,000 |
550,000 |
100.0% |
? |
All January receivables outstanding will be collected in May and the collection pattern since the time of the sale will be the same in May as in previous months.
Overhead and other |
Total |
|
charges |
||
Indirect labour |
$ 34,000 |
|
Property taxes |
1,500 |
|
Depreciation |
25,000 |
|
Utilities |
1,500 |
|
Wage benefits |
9,000 |
|
Fire insurance expired |
1,500 |
|
Amortization of patents |
5,000 |
Spoilage of materials in |
1,500 |
$ 79000 |
the warehouse |
||
Sales Salaries |
45,000 |
|
Administrative salaries |
15,000 |
Required
Collection of April sales | $ 2,75,000 |
Collection of January receivables | $ 8,500 |
Total collections | $ 2,83,500 |
Opening cash balance | $ 5,750 |
Collection of April sales | $ 2,75,000 |
Collection of January receivables | $ 8,500 |
Total collections | $ 2,83,500 |
Cash balance available | $ 2,89,250 |
Payment for Account payables | $ 3,20,000.00 |
Accrued wages paid | $ 11,000.00 |
May Payroll | $ 1,19,000.00 |
Utilities | $ 1,500.00 |
Shipping costs | $ 1,000.00 |
Wage benefits | $ 9,000.00 |
Sales salaries | $ 45,000.00 |
Admin salaries | $ 15,000.00 |
Fire insurance | $ 1,500.00 |
Total cash payments | $ 5,23,000.00 |
Cash balance before borrowing | $ -2,33,750.00 |
Minimum balance reqd | $ 5,500.00 |
Borrowing reqd | $ 2,39,250.00 |
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Question A cash budget is being prepared for Hotels Inc for the month of May. The...
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