Reference no: EM133107784
Question - Gollum Corp. prepares monthly cash budgets. Relevant data from operating budgets for 2017 follow:
|
|
January
|
February
|
|
Sales
|
$275,000
|
$425,000
|
|
Direct materials purchases
|
150,000
|
175,000
|
|
Direct labour
|
75,000
|
95,000
|
|
Manufacturing overhead
|
90,000
|
97,000
|
|
Selling and administrative expenses
|
60,000
|
65,000
|
All sales are on account. Collections are expected to be: 55% in the month of sale, 35% in the fi rst month following sale, 9% in the second month following the sale.
Forty percent 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 are paid in the month incurred, except for selling and administrative expenses, which include $1,000 of depreciation per month.
Other data:
1. Credit sales: November 2016, $340,000; December 2016, $375,000
2. Purchases of direct materials: December 2016, $110,000
3. Other receipts: January-collection of a note receivable, $5,000
February-proceeds from sale of investments, $8,000
4. Other disbursements: January-purchase of equipment, $15,000
February-payment of dividends, $4,000
5. The company's cash balance on January 1, 2017, is expected to be $45,000. The company wants to keep a mini-mum cash balance of $40,000.
6. Interest on borrowings is paid when the principal is paid
Required - Prepare a cash budget for January and February.