Colter Company prepares monthly cash budgets. Relevant data from operating budge
ID: 2479460 • Letter: C
Question
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows:
January
February
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 $1,078 of depreciation per month.
Other data:
The company’s cash balance on January 1, 2017, is expected to be $64,680. The company wants to maintain a minimum cash balance of $53,900.
A.) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.
B.) Prepare a cash budget for January and February in columnar form.
January
February
Sales $388,080 $431,200 Direct materials purchases 129,360 134,750 Direct labor 97,020 107,800 Manufacturing overhead 75,460 80,850 Selling and administrative expenses 85,162 91,630Explanation / Answer
A)
B)
Collection from Customers Particulars January February 50% in the month of sale 194,040 215,600 30% in the first month following the sale 103,488 116,424 20% in the second month following the sale 53,900 68,992 Total 351,428 401,016 Payments for Direct Materials Particulars January February 60% in the month of purchase 77,616 80,850 40% in the first month following the Purchase 43,120 51,744 Total 120,736 132,594