Prepare a cash budget for two months. P10.50B (LO 4) Nigh Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: Sales Direct materials purchases Direct labour Manufacturing overhead Selling and administrative expenses January February $350,000 $400,000 120,000 110,000 85,000 60,000 75,000 115,000 75,000 80,000 All sales are on account. The company expects collections to be 60% in the month of sale, 30% in the first month following the sale, and 10% in the second month following the sale. It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. It pays all other items above in the month incurred. Depreciation has been excluded from manufacturing overhead and selling and administrative expenses. Other data: 1. Credit sales: November 2022, $200,000; December 2022, $280,000 2. Purchases of direct materials: December 2022, $90,000 3. Other receipts: January-collection of December 31, 2022, interest receivable, $3,000; February-proceeds from sale of securities, $5,000 4. Other disbursements: February-payment of $20,000 cash for land The company's cash balance on January 1, 2023, is expected to be $50,000. The company wants to keep a minimum cash balance of $40,000. Instructions a. Prepare schedules for (1) the expected collections from customers and (2) the expected payments for direct materials purchases. a. January: (1) collections = $314,000; (2) payments = $99,000 b. Prepare a cash budget for January and February, with columns for each month. b. Ending cash balance: January $48,000
Prepare a cash budget for two months. P10.50B (LO 4) Nigh Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: Sales Direct materials purchases Direct labour Manufacturing overhead Selling and administrative expenses January February $350,000 $400,000 120,000 110,000 85,000 60,000 75,000 115,000 75,000 80,000 All sales are on account. The company expects collections to be 60% in the month of sale, 30% in the first month following the sale, and 10% in the second month following the sale. It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. It pays all other items above in the month incurred. Depreciation has been excluded from manufacturing overhead and selling and administrative expenses. Other data: 1. Credit sales: November 2022, $200,000; December 2022, $280,000 2. Purchases of direct materials: December 2022, $90,000 3. Other receipts: January-collection of December 31, 2022, interest receivable, $3,000; February-proceeds from sale of securities, $5,000 4. Other disbursements: February-payment of $20,000 cash for land The company's cash balance on January 1, 2023, is expected to be $50,000. The company wants to keep a minimum cash balance of $40,000. Instructions a. Prepare schedules for (1) the expected collections from customers and (2) the expected payments for direct materials purchases. a. January: (1) collections = $314,000; (2) payments = $99,000 b. Prepare a cash budget for January and February, with columns for each month. b. Ending cash balance: January $48,000
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 4P
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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.
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Transcribed Image Text:Prepare a cash budget for two months.
P10.50B (LO 4) Nigh Company prepares monthly cash budgets. Relevant data from
operating budgets for 2023 are as follows:
Sales
Direct
materials
purchases
Direct labour
Manufacturing
overhead
Selling and
administrative
expenses
January February
$350,000 $400,000
120,000 110,000
85,000
60,000
75,000
115,000
75,000
80,000
All sales are on account. The company expects collections to be 60% in the month of
sale, 30% in the first month following the sale, and 10% in the second month following
the sale. It pays 30% of direct materials purchases in cash in the month of purchase
and the balance due in the month following the purchase. It pays all other items above
in the month incurred. Depreciation has been excluded from manufacturing overhead
and selling and administrative expenses. Other data:
1. Credit sales: November 2022, $200,000; December 2022, $280,000
2. Purchases of direct materials: December 2022, $90,000
3. Other receipts: January-collection of December 31, 2022, interest receivable,
$3,000; February-proceeds from sale of securities, $5,000
4. Other disbursements: February-payment of $20,000 cash for land
The company's cash balance on January 1, 2023, is expected to be $50,000. The
company wants to keep a minimum cash balance of $40,000.
Instructions
a. Prepare schedules for (1) the expected collections from customers and (2) the
expected payments for direct materials purchases.
a. January: (1) collections = $314,000; (2) payments = $99,000
b. Prepare a cash budget for January and February, with columns for each month.
b. Ending cash balance: January $48,000
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