China Company expects to have a cash balance of $40,000 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows. Collections from customers: January $90,000, February $200,000. Payments for direct materials: January $60,000, February $95,000. Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $26,000, February $41,000. These costs include depre- ciation of $1,000 per month. All other overhead costs are paid as incured. 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. China 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.

China Company expects to have a cash balance of $40,000 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows. Collections from customers: January $90,000, February $200,000. Payments for direct materials: January $60,000, February $95,000. Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $26,000, February $41,000. These costs include depre- ciation of $1,000 per month. All other overhead costs are paid as incured. 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. China 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.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 5PB: Cash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for...

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