Colter Company prepares monthly cash budgets. Relevant data from operating budge
ID: 2719417 • Letter: C
Question
Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are: January February Sales $371,000 $424,000 Direct materials purchases 116,600 137,800 Direct labor 95,400 106,000 Manufacturing overhead 74,200 79,500 Selling and administrative expenses 83,740 91,160 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 $1,060 of depreciation per month. Other data: 1. Credit sales: November 2013, $275,600; December 2013, $339,200. 2. Purchases of direct materials: December 2013, $106,000. 3. Other receipts: January—Collection of December 31, 2013, notes receivable $15,900; February—Proceeds from sale of securities $6,360. 4. Other disbursements: February—Payment of $5,300 cash dividend. The company’s cash balance on January 1, 2014, is expected to be $63,600. The company wants to maintain a minimum cash balance of $53,000. Collapse question part (a) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.
Explanation / Answer
Monthly Cash Budgets for January and February 2014
January February Opening cash 63,600 57,240 Cash Receipts Collection of accounts receivables: November sales 55,120 December sales 101,760 67,840 January sales 185,500 111,300 February sales 212,000 Collection of notes receivable 15,900 Proceeds from sale of securities 6,360 Cash available for making payments 421,880 454,740 Cash Disbursements Payments for direct materials December purchases 42,400 January purchases 69,960 46,640 February purchases 82,680 Direct labor 95,400 106,000 Manufacturing overhead 74,200 79,500 Selling and administrative overheads 82,680 90,100 Cash dividends 5,300 57,240 44,520 Borrowing NIL 8,480 Closing cash balance 57,240 53,000