Answered: Valley Trails is preparing the Cash…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 34BEA: Performance Report Based on Budgeted and Actual Levels of Production Bowling Company budgeted the...

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Question

Valley Trails is preparing the Cash Budget for the upcoming period, and is concerned about their ability to meet their financial obligations in the short term. Following is information relating to Valley’s financial performance:

Beginning-of-period balances:
Accounts Receivable: $135,000
Accounts Payable: $67,500
Accumulated Factory Depreciation: $720,000
Cash: $33,750

Estimates for end-of-period balances:
Accounts Receivable: $168,750
Accounts Payable: $45,000
Accumulated Factory Depreciation: $740,000

Budgeted activity levels for the period:
Sales: $625,000
Purchases of Direct Materials: $112,000
Direct Labor Wages: $187,500
Manufacturing Overhead: $62,500
Selling and Administrative Expenses: $105,000

Except for purchases of direct materials, all expenses are paid as incurred.

What is the budgeted ending cash balance for the period?

Select one:

a. None of these options are correct.

b. $223,000

c. $191,750

d. $175,500

e. $155,500

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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