Question

Danner Company expects to have a cash balance of $54,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $102,000, February $180,000. Payments for direct materials: January $60,000, February $90,000. Direct labor: January $36,000, February $54,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $25,200, February $30,000. These costs include depreciation of $1,800 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $18,000, February $24,000. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $14,400 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $30,000. The company wants to maintain a minimum monthly cash balance of $24,000. Prepare a cash budget for January and February.

Answer 1

DANNER COMPANY Cash Budget For 2020 $ January 54,000 February $ 33,000 $ $ $ 102,000 $ 180,000 14,400 $ 170,400 $ 213,000 Beginning Cash Balance Add: Cash receipts Collections from customers Sale of Investments Total Cash available Less: Cash Payments Payment to suppliers Direct Labor Manufacturing Overhead Selling and administrative Expenses Cash Disburshments Excess of Cash over disbursements Financing: Add: Borrowings Less: Repayments Ending cash balance $ $ $ $ $ $ 60,000 $ 90,000 36,000 $ 54,000 23,400 $ 28,200 18,000 $ 24,000 137,400 $ 196,200 33,000 $ 16,800 - $ 7,200 S 33,000 S 24,000 Working Notes: January Manufacturing Overhead =$25,200-$1800 = $23.400 February Manufacturing Overhead = $30,000-$1800 = $28,200 February Borrowings = $24,000-$16,800 = $7,200