Jake Company expects to have a cash balance of $45,000 on January 1, 2011.
Relevant monthly budget data for the first 2 months of 2011 are as follows.
Collections from customers: January $100,000, February $160,000.
Payments for direct materials: January $60,000, February $80,000.
Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred.
Manufacturing overhead: January $26,000, February $31,000. These costs include depreciation of $1,000 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $10,000 in cash.
Jake Company has a line of credit at a local bank that enables it to borrow up to $25,000.
The company wants to maintain a minimum monthly cash balance of $25,000.
Instructions
Prepare a cash budget for January and February.