Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are:
January |
February |
|||
Sales |
$350,000 |
$400,000 |
||
Direct materials purchases |
110,000 |
120,000 |
||
Direct labor |
85,000 |
115,000 |
||
Manufacturing overhead |
60,000 |
75,000 |
||
Selling and administrative expenses |
75,000 |
80,000 |
All sales are on account. Collections are expected to be:
As to cash payments (disbursements):
All other items above are paid in the month incurred.
Depreciation has been excluded from manufacturing over-head and selling & admin expenses.
Other data:
Jan - collection of Dec 31, 2016, interest receivable $3,000;
Feb - proceeds from sale of securities $5,000.
The company’s cash balance on January 1, 2017, is expected to be $50,000. The company wants to maintain a minimum cash balance of $40,000.
Instructions
(1) expected collections from customers and
(2) expected payments for direct materials purchases.
(b) Prepare a cash budget for January and February in columnar form.
Expected Collections from Customer |
January |
February |
November ($200,000) |
0 |
|
December (290,000) |
||
January (350,000) |
||
February (400,000) |
||
Total Collections |
Expected Payments for Direct Materials |
January |
February |
December ($ 90,000) |
0 |
|
January (110,000) |
||
February (120,000) |
||
Total Collections |
Mercer Farm Supply Company
Budgeted Income Statement
For the Six Months Ending June 30, 2017
January |
February |
|
Beginning Cash Balance |
$ 50,000 |
$ 49,500 |
ADD: Receipts: |
||
Collection from customers (a) #1 |
||
Total Receipts |
||
Total Available Cash |
||
LESS: Disbursements: |
||
Direct Materials (a) #2 |
||
Total Disbursements |
||
Excess (deficiency) of Available Cash over Cash Disbursements |
||
Financing: |
||
Ending Cash Balance |
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