Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are: January February Sales $360,000 $400,000 Direct Materials purchases 120,000 125,000 Direct Labor 90,000 100,000 Manufacturing Overhead 70,000 75,000 Selling and administrative expenses 79,000 85,000 All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. 60% of direct materials purchases are paid in cas in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,000 of depreciation per month. Other Data: 1. Credit sales : November 2013, $250,000; Desember 2013, $320,000 2. Purchases of direct materials: December 2013, $100,000 3. Other receipts: January-Collection of Dec 31, 2013, notes receivable $15,000; February-Proceeds from sale of securities $6,000 4. Othe disbursements: February-Payment of $660,000. The company wants to maintain a minimum cash balance of $50,000
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.
Colter Company prepares monthly
January February
Sales $360,000 $400,000
Direct Materials purchases 120,000 125,000
Direct Labor 90,000 100,000
Manufacturing
Selling and administrative expenses 79,000 85,000
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. 60% of direct materials purchases are paid in cas in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,000 of
Other Data:
1. Credit sales : November 2013, $250,000; Desember 2013, $320,000
2. Purchases of direct materials: December 2013, $100,000
3. Other receipts: January-Collection of Dec 31, 2013, notes receivable $15,000; February-Proceeds from sale of securities $6,000
4. Othe disbursements: February-Payment of $660,000. The company wants to maintain a minimum cash balance of $50,000
Instructions :
(a) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February
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