Edwards Company has projected sales and production in units for the second quart

Question

Edwards Company has projected sales and production in units for the second quarter of the coming year as follows:

Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses (all paid in cash) will amount to $70,000 per month. The accounts payable balance on March 31 totals $95,000, all of which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Edwards Company. (Omit the "$" sign in your response.)

Assume that all units are sold on account for $13 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $299,000 ($49,000 from February's sales and the remainder from March sales.) Prepare a schedule for each month showing budgeted cash receipts for Edwards Company. (Omit the "$" sign in your response.)

April May June   Sales 34,000 24,000 29,000   Production 29,000 29,000 34,000

Explanation / Answer

Part A)

The schedule of cash disbursements has been given below:

__________

Part B)

The schedule of cash receipts has been given below:

Notes:

The total sales for the month of March = Accounts Receivable Balance as on 1st April/(1-Sales Percentage Already Collected) = (299,000 - 49,000)/(1-60%) = $625,000.

March Sales Collected in April = 625,000*30% = $187,500

March Sales Collected in May = 625,000*10% = $62,500

Schedule of Cash Disbursements for Edward Company April May June Production cost $203,000 (29,000*7) $203,000 (29,000*7) $238,000 (34,000*7) Cash disbursement: Production this month 81,200 (203,000*40%) 81,200 (203,000*40%) 95,200 (238,000*40%) Production prior month 95,000 (given) 121,800 (203,000*60%) 121,800 (203,000*60%) Selling and administration 70,000 70,000 70,000 Total disbursement $246,200 $273,000 $287,000

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