Question

Indigo Company expects to have a cash balance of $45,810 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows. Collections from customers: January $86,530, February $152,700. Payments for direct materials: January $50,900, February $76,350 Direct labor: January $30,540, February $45,810. Wages are paid in the month they are incurred. Manufacturing overhead: January $21,378, February $25,450. These costs include depreciation of $1,527 per month. All other overhead costs are paid as incurred Selling and administrative expenses: January $15,270, February $20,360. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $12,2 16 in cash. Indigo Company has a line of credit at a local bank that enables it to borrow up to $25,450. The company wants to maintain a minimum monthly cash balance of $20,360. Prepare a cash budget for January and February. (Do not leave any answer field blank. Enter 0 for amounts.)

Answer 1

Solution

INDIGO COMPNY
Cash Budget
For january and February' 2017
	January	February
Beginning cash	$      45,810.00	$       27,995.00
Cash Collections	$      86,530.00	$     152,700.00
Sales for marketable securities	$      12,216.00
Available cash balance	$    144,556.00	$     180,695.00
Cash Disbursements for
Direct material	$      50,900.00	$       76,350.00
Direct Labor	$      30,540.00	$       45,810.00
Manufacturing Overheads	$      19,851.00	$       23,923.00
Selling and Administrative expenses	$      15,270.00	$       20,360.00
Total cash Disbursements	$    116,561.00	$     166,443.00
Ending Cash Balance before financing	$      27,995.00	$       14,252.00
Minimum Cash Balance Desired	$      20,360.00	$       20,360.00
Projected cash Excess (deficit)	$         7,635.00	$       (6,108.00)
Financing
Borrowing		$          6,108.00
Principal repayments	$                      -	$                       -
Total Effects of Financing	$                      -	$          6,108.00
Ending Cash Balance	$      27,995.00	$       20,360.00