Silent Company prepares monthly cash budgets. Relevant data from operating budget for 2020 are as follows January ($) February ($) Sales budget 350,000.00 400,000.00 Direct materials purchases 95,000.00 110,000.00 Direct labor 80,000.00 95,000.00 Manufacturing overhead 60,000.00 75,000.00 Selling & administrative expenses 75,000.00 85,000.00 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. 40% 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. Other information: Credit sales for November, 2019 = $200,000 and December, 2019 = $280,000 Purchases of direct materials for December, 2019 = $90,000 Other Receipts in Jan.: Collection of December 31, 2019 interest receivable = $3,000 Proceeds from sale of securities in February, 2020 = $5,000 Purchase of land in February, 2020 = $20,000 As a company practice, cash balance is strictly maintained at $50,000 every month. The company has a readily available credit line with a bank.

Silent Company prepares monthly cash budgets. Relevant data from operating budget for 2020 are as follows January ($) February ($) Sales budget 350,000.00 400,000.00 Direct materials purchases 95,000.00 110,000.00 Direct labor 80,000.00 95,000.00 Manufacturing overhead 60,000.00 75,000.00 Selling & administrative expenses 75,000.00 85,000.00 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. 40% 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. Other information: Credit sales for November, 2019 = $200,000 and December, 2019 = $280,000 Purchases of direct materials for December, 2019 = $90,000 Other Receipts in Jan.: Collection of December 31, 2019 interest receivable = $3,000 Proceeds from sale of securities in February, 2020 = $5,000 Purchase of land in February, 2020 = $20,000 As a company practice, cash balance is strictly maintained at $50,000 every month. The company has a readily available credit line with a bank.

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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