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, 2017. Budgeted sales and cash payments for product costs for the quarter follow:

Sales are 15% cash and 85% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $44,100 in accounts receivable; $3,600 in accounts payable; and a $4,100 balance in loans payable. A minimum cash balance 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 balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,100 per month), and rent ($5,600 per month).

Prepare a cash budget for each of the months of July, August, and September

July August September Budgeted sales $ 54,500 $ 70,500 $ 57,500 Budgeted cash payments for Direct materials 15,260 12,540 12,860 Direct labor 3,140 2,460 2,540 Factory overhead 19,300 15,900 16,300

Explanation / Answer

Cash budget for each of the months of July, August, and September is as prepared below:

Working:

Built Tight Cash Budget For the quarter ended September 30 Month Particulars July August September Total Beginning Cash balance 15,000 15,000 17,861 15,000 Add: Budgeted Cash receipts $52,275 $56,900 $68,550 $177,725 cash available for use $67,275 $71,900 $86,411 $192,725 Less: cash Disbursements    Accounst payable 3,600 $3,600    Direct Material $15,260 $12,540 $12,860 $40,660    Direct labour Cost $3,140 $2,460 $2,540 $8,140    Factory Overhead $19,300 $15,900 $16,300 $51,500    Sales Commissions (10% of sales) $5,450 $7,050 $5,750 $18,250    Office Salaries 3,100 3,100 3,100 $9,300    Rent 5,600 5,600 5,600 $16,800    Interst Exp 41 73 Total disbusrement 55,491 46,723 46,150 $148,364 Cash surplus/Deficit 11,784 25,177 40,261 44,361 Loan Taken 3,216 -7,316 0 -4,100 Budgeted ending cash balance 15,000 17,861 40,261 40,261 Loan Balance Loan Balance - beginning of month 4,100 7,316 0 Additional loan (loan repayment) 3,216 -7,316 0 Loan Balance - end of month 7,316 0 0

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