Derby Company prepares monthly cash budgets. Relevant data from operating ? Prep

Question

Derby Company prepares monthly cash budgets. Relevant data from operating ? Prepare cash budget for 2 months. Sales Direct materials purchase Direct labor Manufacturing overhead Selling and admintrattvc expenses All sales arc on account Collections are expected to be 60% in the month of sak 25% in the first month following the sale, and 15% in the second month following the sale. Thirty percent (30%) 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 Depreciation has been excluded from manufacturing overhead and selling and administrative expenses Other data: Credit sales: November 2013. $200,000; December 2013. $290,000. Purchases of direct materials December 2013. $90,000 Other receipts: January collection of December 31. 2013. interest receivable $3,000. February - Proceeds from sale of securities $5,000. Other disbursements: February payment of $20,000 for land. The company's cash balance on January 1. 2014. is expected to be $50,000 The com pany wants to maintain a minimum cash balance of $40,000 Prepare schedules for (1) expected collections from customer, and (2) expectec pay- mernts for direct material purchases Prepare a cash budget for January and February in columnar form.

Explanation / Answer

Schedule of cash collections

Expected payment for direct material purchase

Total cash disbursement for materials         $96,000                      $113,000

Cash budget

Jan Feb November 200,000 @15% 30,000 December 290,000 @25% jan @15% feb 72,500 $43,500 Janaury 350,000 210,000 87,500 Feb 240,000 total collections $312,500 $371,000

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