Built-Tight is preparing its master budget for the quarter ended September 30, 2

Question

Built-Tight is preparing its master budget for the quarter ended September 30, 2015. Budgeted sales and cash payments for product costs for the querter follow September $ 60,000 $ 76,000 52,000 July Budgeted sales Budgeted cash payments for Direct materials Direct labor Fectory overhead 16.960 4,840 14.240 4,160 21,00017,600 14,560 4,240 18,000 Sales are 30% cash and 70% on credit All credit sales are collected in the month following the sale. The June 30 balance sheet includes baiances of $15,000 in cash $45,800 In accounts recelvable $5,300 in accounts payable f'included in cash payments for direct matenals; and a $5,800 balance in loans payabie. A minimum cash bolance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs Interest is 1% per month based on the beginning of the month loan balance and is paid at each month-end. If an excess baience of cesh exists, loans ere repaid at the end of the month. Operating expenses are pald in the month incurred ($4,800 per month), and rent ($7,300 per month) thnsist of sales commissions (10% of sales), omce salaries 5.55 points

Explanation / Answer

Required budgets are as prepared below:

Built Tight Cash Receipt Budget For July, August and September Particulars July August September Beginning Accounts Receivable 45,800 Cash sales 18,000 22,800 15,600 Credit Sales 42,000 53,200 Total cash receipts 63,800 64,800 68,800 Built Tight Cash Budget For July, August and September Month Particulars July August September Beginning Cash balance 15,000 15,000 21,112 Add: Cash Receipts 63,800 64,800 68,800 Total available cash 78,800 79,800 89,912 Cash disbursements: Direct material 16,960 14,240 14,560 Direct labour 4,840 4,160 4,240 Factory overhead 21,000 17,600 18,000 Sales commissions (10% of sales) 6,000 7,600 5,200 Office Salaries 4,800 4,800 4,800 Rent 7,300 7,300 7,300 Interest on bank loan July 58 August 30 60,958 55,730 54,100 Preliminary Cash balance 17,842 24,070 35,812 Loan borrowed/(returned) -2,842 -2,958 0 Ending Cash balance 15,000 21,112 35,812 Loan Balance July August September Loan Balance-Beginning of month 5,800 2,958 $0 Additional loan (loan repayment) -2,842 -2,958 Loan Balance-End of month 2,958 0

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