Problem -
Part A - Danner Company expects to have a cash balance of $59,110 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows.
Collections from customers: January $109,225, February $192,750.
Payments for direct materials: January $64,250, February $89,950.
Direct labor: January $38,550, February $57,825. Wages are paid in the month they are incurred.
Manufacturing overhead: January $26,985, February $32,125. These costs include depreciation of $1,285 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $19,275, February $25,700. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $12,850 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $32,125. The company wants to maintain a minimum monthly cash balance of $25,700.
Prepare a cash budget for January and February.
Part B - Duncan Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2014, the following data are available.
1. Sales: 20,800 units quarter 1; 22,700 units quarter 2.
2. Variable costs per dollar of sales: Sales commissions 5%, delivery expense 2%, and advertising 4%.
3. Fixed costs per quarter: Sales salaries $10,200, office salaries $6,480, depreciation $4,750, insurance $2,080, utilities $810, and repairs expense $610.
4. Unit selling price: $22.
Prepare a selling and administrative expense budget by quarters for the first 6 months of 2014.