Question

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

	Jan	Feb	Mar
Sales	49,000	51,000	56,000
Production	53,000	48,000	49,000

Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 35% are paid in the month in which they are incurred and the balance in the next month. $95,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $185,000, which will be paid in Feb.

All units are sold on account for $13 each. Cash collections from sales are budgeted at 55% in the month of sale, 25% 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 $500,000 ($90,000 from November’s sales and the remaining from January).

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

Febru March Janua Units sold 49,000 51,000 56,000 $ 13.00 $13.00 13.00 663,000 728,000 Selling price per unit $ 637,000 Total sales Units produced 53,000 48,000 49,000 7.00 $ 7.00 $ 7.00 Cost per unit 371,000 336,000 343,000 Cost of production Answer 1 Februa March Janua Cash payment for production cost For previous month's $ 185,000 $241,150 $ 218,400 $ 129,850 $ 117,600 $ 120,050 $ 95,000 $ 95,000 95,000 For current month's Cash payment for S&A expenses 453,750 433,450 Total cash disbursements S 409,850 Answer 2 February March January Cash receipts from customers $ 90,000 $ 227,778$ 182,222 From November's sales From December's sales $ 350,350 $ 159,250 $ 127,400 $ 350,350 $ 159,250 $ 350,350 From January's sales From February's sales From March's sales 668,128 $ 691,822 $ 637,000 Total cash receipts