Reference no: EM132723826
Danner Company expects to have a cash balance of $49,500 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows.
Collections from customers:
January $93,500,
February $165,000.
Payments for direct materials:
January $55,000,
February $82,500.
Direct labor:
January $33,000,
February $49,500.
Wages are paid in the month they are incurred. Manufacturing overhead:
January $23,100, February $27,500.
These costs include depreciation of $1,650 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses:
January $16,500,
February $22,000.
These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $13,200 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $27,500. The company wants to maintain a minimum monthly cash balance of $22,000.
Problem 1: Do a cash budget for January and February.