8. Garza Company expects to have a cash balance of $46,000 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $85,000, February $150,000. Payments for direct materials: January $50,000, February $70,000. Direct labor: January $30,000, February $45,000 are wages paid in the month incurred. Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,000 per month. Selling and administrative expenses: January $15,000, February $20,000. Sales of marketable securities in January are expected to realize $10,000 in cash. Garza Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000. Instructions Prepare a cash budget for January and February
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
![8. Garza Company expects to have a cash balance of $46,000 on
January 1, 2020.
Relevant monthly budget data for the first 2 months of
2020 are as follows.
Collections from customers: January $85,000, February
$150,000.
Payments for direct materials: January $50,000, February
$70,000.
Direct labor: January $30,000, February $45,000 are
wages paid in the month incurred.
Manufacturing overhead: January $21,000, February
$25,000. These costs include depreciation of $1,000 per
month.
Selling and administrative expenses: January $15,000,
February $20,000.
Sales of marketable securities in January are expected to
realize $10,000 in cash.
Garza Company has a line of credit at a local bank that
enables it to borrow up to $25,000.
The company wants to maintain a minimum monthly cash
balance of $20,000.
Instructions
Prepare a cash budget for January and February](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F39c73296-2167-462b-a32b-ce5b4e557272%2Fb80de92f-3a12-4c35-a5f0-740bdc50dbc0%2Fw2jsejkk_processed.jpeg&w=3840&q=75)
![](/static/compass_v2/shared-icons/check-mark.png)
Step by step
Solved in 2 steps with 1 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Principles of Cost Accounting](https://www.bartleby.com/isbn_cover_images/9781305087408/9781305087408_smallCoverImage.gif)
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
![Principles of Cost Accounting](https://www.bartleby.com/isbn_cover_images/9781305087408/9781305087408_smallCoverImage.gif)
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
![Financial And Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
![Managerial Accounting: The Cornerstone of Busines…](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)