Haas Company prepares monthly cash budgets. Relevant data from operating budgets for 2011 are:
- January February
- Sales $350,000 $400,000
- Direct materials purchases 110,000 130,000
- Direct labor 90,000 100,000
- Manufacturing overhead 70,000 75,000
- Selling and administrative expenses 79,000 86,000
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,000 of depreciation per month.
Other data:
- Credit sales: November 2010, $260,000; December 2010, $320,000.
- Purchases of direct materials: December 2010, $100,000.
- Other receipts: January-Collection of December 31, 2010, notes receivable $15,000; February-Proceeds from sale of securities $6,000.
- Other disbursements: February-Withdrawal of $5,000 cash for personal use of owner, Dewey Yaeger.
- The company's cash balance on January 1, 2011, is expected to be $60,000. The company wants to maintain a minimum cash balance of $50,000.