The results of operations for the Preston Manufacturing Company for the fourth q

Question

The results of operations for the Preston Manufacturing Company for the fourth quarter of 2014 were as follows:

Note: Preston Manufacturing uses the variable costing method. Thus, only variable production costs are included in inventory and cost of goods sold. Fixed production costs are charged to expense in the period incurred.

The company’s balance sheet as of the end of the fourth quarter of 2014 was as follows:

Additional information:

Preston Manufacturing Company
Cash Budget
For the Quarter Ended March 31, 2015

No purchases of property, plant, or equipment are expected in the first quarter of 2015.

Sales $ 540,000 Less variable cost of sales 324,000 Contribution margin 216,000 Less fixed production costs $ 108,000 Less fixed selling and administrative expenses 54,000 162,000 Income before taxes 54,000 Less taxes on income 21,600 Net income $ 32,400

Explanation / Answer

PRESTON MANUFACTURING COMPANY

CASH BUDGET FOR THE QUARTER ENDED MARCH 31 2015

$ Opening cash balance 138,000 Collection for Account Receivable Last Quarter 270,000 Current Quarter 302,400 Total Cash Available 710,400 Cash Disbursements Payment for materials Last Quarter 77,760 Current Qurter 58,060 Direct Labor 145,152 Variable Overhead Cost 72,576 Fixed Production Cost 100,980 Fixed Sales & Administrative Cost 46,920 Income tax 30,808 Total Disbursements 532,256 Closing Cash Balance 178,144

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