Reference no: EM131988688

Problem -

Part A - Danner Company expects to have a cash balance of $59,110 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows.

Collections from customers: January $109,225, February $192,750.

Payments for direct materials: January $64,250, February $89,950.

Direct labor: January $38,550, February $57,825. Wages are paid in the month they are incurred.

Manufacturing overhead: January $26,985, February $32,125. These costs include depreciation of $1,285 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $19,275, February $25,700. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $12,850 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $32,125. The company wants to maintain a minimum monthly cash balance of $25,700.

Prepare a cash budget for January and February.

Part B - Duncan Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first 6 months of 2014, the following data are available.

1. Sales: 20,800 units quarter 1; 22,700 units quarter 2.

2. Variable costs per dollar of sales: Sales commissions 5%, delivery expense 2%, and advertising 4%.

3. Fixed costs per quarter: Sales salaries $10,200, office salaries $6,480, depreciation $4,750, insurance $2,080, utilities $810, and repairs expense $610.

4. Unit selling price: $22.

Prepare a selling and administrative expense budget by quarters for the first 6 months of 2014.