PLEASE EXPLAIN HOW TO SOLVE, THANKS Problem 20-4A January February (a) Expected

Question

PLEASE EXPLAIN HOW TO SOLVE, THANKS

Problem 20-4A

January

February

(a)

Expected Collections from Customers

January

February

Expected Payments for Direct Materials

January

February

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(b)

COLTER COMPANY
Cash Budget
For the Two Months Ending February 28, 2013

January

February

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Problem 20-4A

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2013 are:

January

February

Sales $357,350 $408,400 Direct materials purchases 112,310 132,730 Direct labor 91,890 102,100 Manufacturing overhead 71,470 76,575 Selling and administrative expenses 80,659 87,806
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) 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 except for selling and administrative expenses that include $1,021 of depreciation per month.

Other data:
1. Credit sales: November 2012, $265,460; December 2012, $326,720. 2. Purchases of direct materials: December 2012, $102,100. 3. Other receipts: January—Collection of December 31, 2012, notes receivable $15,315;                       February—Proceeds from sale of securities $6,126. 4. Other disbursements: February—Withdrawal of $5,105 cash for personal use of owner, Nick Haniwall.
The company’s cash balance on January 1, 2013, is expected to be $61,260. The company wants to maintain a minimum cash balance of $51,050.

Explanation / Answer

Expected Payments for Direct Material ( in $ )

A. Collection From Debtors (in $ ) November December January February Sales (a) 265460 326720 357350 408400 50% in the same month (a) * .50 132730 163360 178675 204200 30%in the first month following sale   79638 98016 107205 20% in second month following sale 53092 65344 Total Collection 398190 569718 687133 785149

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