Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: January $50,000, February $75,000. Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,500 per month. All other overhead costs 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 $12,000 in cash. Danner Company has a line of credit at a local bank that enabl borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
![Danner Company expects to have a cash balance of $45,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as
follows.
Collections from customers: January $85,000, February $150,000.
Payments for direct materials: January $50,000, February $75,000.
Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred.
Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,500 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 $12,000 in cash. Danner 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 $20,000.
Prepare a cash budget for January and February.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd17b9706-e9c9-4374-9367-0a496aa440c1%2F52667d4b-56c6-4483-957a-a8296d286cf7%2Fj369ka_processed.jpeg&w=3840&q=75)
![V:
DANNER COMPANY
Cash Budget
$
14
January
$
February](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd17b9706-e9c9-4374-9367-0a496aa440c1%2F52667d4b-56c6-4483-957a-a8296d286cf7%2Frmhlrsq_processed.jpeg&w=3840&q=75)
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