Question

CALCULATOR FULL SCREEN PRINTER VERSION BACK NEXT Problem 13-4 (Part Level Submission) Culver Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: Sales Direct materials purchases Direct labor Manufacturing overhead Selling and administrative expenses January $410,400 136,800 102,600 79,800 90,060 February $456,000 142,500 114,000 85,500 96,900 All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,140 of depreciation per month Other data: 2. 3. Credit sales: November 2016, $285,000; December 2016, $364,800. Purchases of direct materials: December 2016, $114,000. Other receipts: January-Collection of December 31, 2016, notes receivable $17,100; February--Proceeds from sale of securities $6,840. Other disbursements: February - Payment of $6,840 cash dividend. 4. The company's cash balance on January 1, 2017, is expected to be $68,400. The company wants to maintain a minimum cash balance of $57,000.

Answer 1

SOLUTION

1. Schedule for expected cash collection

	January ($)	February ($)
Collection from -
November sales (285,000*20%)	57,000
December sales (364,800*30%), (364,800*20%)	109,440	72,960
January sales (410,400*50%), (410,400*30%)	205,200	123,120
February sales (456,000*50%)		228,000
Total	371,640	424,080

Schedule of expected payments

	January ($)	February ($)
December (114,000*40%)	45,600
January (136,800*60%), (136,800*40%)	82,080	54,720
February (142,500*60%)		85,500
Total	127,680	140,220

2. Cash budget-

	January	February
Beginning cash balance	68,400	58,140
Add: Cash receipts-
Collections from credit sales	371,640	424,080
Collection of notes receivable	17,100
Proceeds from sale of securities		6,840
Total cash receipts	388,740	430,920
Total cash available (A)	457,140	489,060
Less: Cash disbursements:
Direct materials	127,680	140,220
Direct labor	102,600	114,000
Overhead	79,800	85,500
Selling and administrative expenses (90,060-1,140),(96,900-1,140)	88,920	95,760
Payment of dividend		6,840
Total disbursements (B)	399,000	442,320
Excess/ (Deficiency) of cash (A-B)	58,140	46,740
Borrowings	0	10,260
Interest expense	0	0
Repayment	0	0
Ending cash balance	58,140	57,000