Cash Budget - Below is summary monthly income statement data for Ace Manufacturing Company.
|
|
January
|
February
|
|
Sales revenue
|
275,000
|
250,000
|
|
Direct materials purchases
|
60,000
|
70,000
|
|
Direct labor
|
88,000
|
95,000
|
|
Manufacturing overhead
|
60,000
|
62,000
|
|
Selling and administrative expenses
|
45,000
|
46,000
|
All sales are on account, and history has shown that 40% of sales is expected to be collected in the month of the sale, with 60% collected the following month.
Direct materials are paid 50% in the month of purchase and 50% the following month. All other expenses are paid as incurred. All costs shown are cash-based costs (depreciation has already been eliminated).
Other data:
1. December sales were $240,000.
2. Purchases of direct materials purchased in December were $50,000.
3. The company has interest payments due of $5,000 per month.
4. The cash balance on January 1 was $15,000.
Instructions -
A. Prepare schedules for expected collections from customers and expected payments for direct materials purchases.
B. Prepare a cash budget for January and February.