Coronado Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows. January February Sales $331,200 $368,000 Direct materials purchases 110,400 115,000 Direct labor 82,800 92,000 Manufacturing overhead 64,400 69,000 Selling and administrative expenses 72,680 78,200 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 $920 of depreciation per month. Other data: 1. Credit sales: November 2021, $230,000; December 2021, $294,400. 2. Purchases of direct materials: December 2021, $92,000. 3. Other receipts: January—Collection of December 31, 2021, notes receivable $13,800; February—Proceeds from sale of securities $5,520. 4. Other disbursements: February—Payment of $5,520 cash dividend. The company’s cash balance on January 1, 2022, is expected to be $55,200. The company wants to maintain a minimum cash balance of $46,000. (a) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and Februar

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4P

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Coronado Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows.

	January	February
Sales	$331,200	$368,000
Direct materials purchases	110,400	115,000
Direct labor	82,800	92,000
Manufacturing overhead	64,400	69,000
Selling and administrative expenses	72,680	78,200

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 $920 of depreciation per month.

Other data:

1.		Credit sales: November 2021, $230,000; December 2021, $294,400.
2.		Purchases of direct materials: December 2021, $92,000.
3.		Other receipts: January—Collection of December 31, 2021, notes receivable $13,800;
		February—Proceeds from sale of securities $5,520.
4.		Other disbursements: February—Payment of $5,520 cash dividend.

The company’s cash balance on January 1, 2022, is expected to be $55,200. The company wants to maintain a minimum cash balance of $46,000.

(a)

Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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