Prepare cash budget for 2 months . (LO 5), AP Derby Company prepares monthly cas
ID: 2461323 • Letter: P
Question
Prepare cash budget for 2 months.
(LO 5), AP
Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are:
All sales are on account. Collections are expected to be 60% in the month of sale, 25% in the first month following the sale, and 15% in the second month following the sale. Thirty percent (30%) 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. Depreciation has been excluded from manufacturing overhead and selling and administrative expenses.
Other data:
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The company's cash balance on January 1, 2014, is expected to be $50,000. The company wants to maintain a minimum cash balance of $40,000.
Instructions
Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases.
Prepare a cash budget for January and February in columnar form.
Explanation / Answer
january february cash balance at the beginning 50000 49500 add reciepts collection from customers 312500 371000 other reciepts 5000 total cash available 362500 425500 less cash disbursement direct material 96000 77000 direct labor 85000 115000 manufacturing overhead 60000 75000 selling and administrative expense 75000 80000 payments 96000 20000 cash balance -49500 58500 `wmaintain cash balance 40000 cash surplus 18500