Problem 10-1 (Part Level Submission) The results of operations for the Preston M

Question

Problem 10-1 (Part Level Submission)

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:

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

Prepare a cash budget for the first quarter of 2015.

Using this list of accounts

Accounts Payable
Accounts Receivable
Accumulated Depreciation
Cash
Common Stock
Inventory
Property, Plant, and Equipment
Retained Earnings

Sales $ 550,000 Less variable cost of sales 330,000 Contribution margin 220,000 Less fixed production costs $ 110,000 Less fixed selling and administrative expenses 55,000 165,000 Income before taxes 55,000 Less taxes on income 22,000 Net income $ 33,000

Explanation / Answer

Answer:

Preston manufacturing company First Quarter 2015 Cash Budget Opening cash 163000 Add: cash collection from sales Collection from accounts receivable 220000 Collection from credit sales (60%) 363000 Total cash receipts 746000 Less: cash payments: Payment of direct material 58080 Direct labor 145200 Variable overhead 72600 Fixed production cost 104030 Fixed selling and asministrative cost 48480 Tax expenses 29396 Total cash payment 457786 Net cash balance 288214

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