THE FOUR SIMPLE QUESTIONS ARE BOLDED AND NUMBERED AT THE BOTTOM, ALL OF THESE NU
ID: 2391837 • Letter: T
Question
THE FOUR SIMPLE QUESTIONS ARE BOLDED AND NUMBERED AT THE BOTTOM, ALL OF THESE NUMBERS/ INFO IS SO THAT WAY IT CAN BE ANSWERED<3! THANKS!
1. The ending cash balance at the end of March is significantly greater than
the cash balance at the end of February. Identify the material causes of
that difference.
2. Describe the relationship of the Cash Budget to the Sales Budget.
3. What role does Depreciation play in the Cash Budget?
4.Management requires a cash balance of $800,000 at the end of each
month. Provide five reasons management requires a designated cash
balance at the end of each month
Waterways Corporation is preparing its budget for the coming year, 2017. The first step is to plan for the first quarter of that coming year. Waterways gathered the following information from the managers.Sales Unit sales for November 2016 112,500 Unit sales for December 2016 102,100 Expected unit sales for January 2017 113,000 Expected unit sales for February 2017 112,500 Expected unit sales for March 2017 116,000 Expected unit sales for April 2017 125,000 Expected unit sales for May 2017 137,500 Unit selling price $12
Waterways likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2016, totaled $183,780.
Direct Materials Item Amount Used per Unit Inventory, Dec. 31 Metal 1 lb @ 58¢ per lb. 5,177.5 lbs Plastic 12 oz @ 6¢ per oz 3,883.125 lbs Rubber 4 oz @ 5¢ per oz 1,294.375 lbs 2 lbs per unit 10,355.0 lbs
Metal, plastic, and rubber together are 75¢ per pound per unit.
Waterways likes to keep 5% of the materials needed for the next month in its ending inventory. Payment for materials is made within 15 days. 50% is paid in the month of purchase, and 50% is paid in the month after purchase. Accounts Payable on December 31, 2016, totaled $120,595. Raw Materials on December 31, 2016, totaled 11,295 pounds.
Direct Labor Labor requires 12 minutes per unit for completion and is paid at a rate of $8 per hour. Manufacturing Overhead Indirect materials 30¢ per labor hour Indirect labor 50¢ per labor hour Utilities 45¢ per labor hour Maintenance 25¢ per labor hour Salaries $42,000 per month Depreciation $16,800 per month Property taxes $2,675 per month Insurance $1,200 per month Maintenance $1,300 per month Selling and Administrative Variable selling and administrative cost per unit is $1.60. Advertising $15,000 a month Insurance $1,400 a month Salaries $72,000 a month Depreciation $2,500 a month Other fixed costs $3,000 a month
Other Information
The Cash balance on December 31, 2016, totaled $100,500, but management has decided it would like to maintain a cash balance of at least $800,000 beginning on January 31, 2017. Dividends are paid each month at the rate of $2.50 per share for 5,000 shares outstanding. The company has an open line of credit with Romney’s Bank. The terms of the agreement requires borrowing to be in $1,000 increments at 8% interest. Waterways borrows on the first day of the month and repays on the last day of the month. A $500,000 equipment purchase is planned for February.
Explanation / Answer
2. A sales budget is the primary budget on which other budgets in a business rely. The projected sales figures determine how much money it must spend on various items, such as inventory, supplies and labour costs in order to meet the demand. In this way the sales budget will affect the cash budget in which it will determine the cash movement in the company in order to meet the expected demand. In the same note the cash expenditure will ensure that the sales budget is met. Besides that the sales budget estimates the cash receipts from the projected sales as well as the cash available to spend on the said expenses. Therefore, there is a close relationship between the sales budget and the cash budget.
3. Depreciation is recognized as an expense in the income statement but in real sense it does not involve the flow of cash. Therefore, depreciation does not play any role in the Cash Budget.
4.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.