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Garza Company expects to have a cash balance of $ 55,200 on January 1, 2010. Rel

ID: 2390007 • Letter: G

Question

Garza Company expects to have a cash balance of $ 55,200 on January 1, 2010. Relevant monthly budget data for t he first 2 months of 2010 are as follows. Collections from customers: January $ 102,000, February $ 180,000. Payments for direct materials: January $60,000, February $841000 . Direct labor: January $36,000, February $ 54,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $25,200, February $301000 . These costs include depredation of $ 1, 200 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $ 18,000, February $24,000. These costs are exclusive of depreciation. They are paid as incurred. Sales of market able securities in January are expected to realize $12,000 in cash. Garza Company has a line of credit at a local bank that enables it to borrow up to $301000 . The company wants to maintain a minimum monthly cash balance of $ 24,000. Complete the cash budget for January and February. (List multiple entries from largest to smallest amounts, e.g. 1. 0, 5, 1. For January. If answer is zero, please enter 0, do not leave any fields blank.)

Explanation / Answer

                                      Gaza Company
                                       Cash Budget
                   For the months ending February, 2010
                                                       January         February
Beginning Cash Balance                      55,200            31,200
Add : Receipts
        Collections from customers       102,000         180,000
        Sale of Marketable Securities      12,000                   0
Total receipts                                 114,000         180,000

Total available cash                          169,200         211,200

Less : Disbursement
         Direct materials                      60,000           84,000
         Direct labor                             36,000          54,000
         Manufacturing OH                   24,000          28,800
         S & A expense                        18,000          24,000
Total disbursements                       138,000        190,800

Excess (deficiency) of available
cash over cash disbursement           31,200          20,400

Financing                                               0            3,600        
Ending Cash Balance                       31,200         24,000