Reference no: EM132972564

Martin Company expects to have a cash balance of $135,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows:

Collections from customers: January $246,500, February $435,000.
Payments for direct materials: January $155,000, February $240,000
Direct labor: January $90,000, February $135,000. Wages are paid in the month they are incurred.
Manufacturing overhead: January $63,000, February $75,000. These costs include depreciation of $5,000 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $45,000, February $60,000. These costs are exclusive of depreciation. They are paid as incurred.

• Sales of marketable securities in January are expected to realize $36,000 in cash.
• Martin Company has a line of credit at the local bank that enables it to borrow up to $75,000. The company wants to maintain a minimum monthly cash balance of $60,000.

Instructions

Problem a. Prepare a cash budget for January and February.