Pink Martini Corporation is projecting a cash balance of $31,000 in its December

Question

Pink Martini Corporation is projecting a cash balance of $31,000 in its December 31, 2007, balance sheet. Pink Martini’s schedule of expected collections from customers for the first quarter of 2008 shows total collections of $180,000. The schedule of expected payments for direct materials for the first quarter of 2008 shows total payments of $41,000. Other information gathered for the first quarter of 2008 is: Sale of equipment $3,500, direct labor $70,000, manufacturing overhead $35,000, selling and administrative expenses $45,000, and purchase of securities $12,000. Pink Martini wants to maintain a balance of at least $25,000 cash at the end of each quarter.
INSTRUCTIONS:
Prepare a cash budget for the first quarter.

Explanation / Answer

Opening Balance 31,000.00 Total Collections 180,000.00 Sale of Equipment 3,500.00 214,500.00 214,500.00 Payments : For Direct Materials 41,000.00 For Direct Labor 70,000.00 Manufacturing Overhead 35,000.00 Selling & Distribution Expenses 45,000.00 Purchase of securities 12,000.00 203,000.00 (203,000.00) Cash required to maintain 23,500.00 minimum balance required Cash Balance at the end 35,000.00

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