Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows: January February Sales $417,600 $464,000 Direct materials purchases 139,200 145,000 Direct labor 104,400 116,000 Manufacturing overhead 81,200 87,000 Selling and administrative expenses 91,640 98,600 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. Sixty percent (60%) 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 above are paid in the month incurred except for selling and administrative expenses that include $1,160 of depreciation per month. Other data: 1. Credit sales: November 2016, $290,000 ; December 2016, $371,200. 2. Purchases of direct materials: December 2016, $116,000. 3. Other receipts: January—Collection of December 31, 2016, notes receivable $17,400; February—Proceeds from sale of securities $6,960. 4. Other disbursements: February—Payment of $6,960 cash dividend. The company’s cash balance on January 1, 2017, is expected to be $69,600. The company wants to maintain a minimum cash balance of $58,000. A) Prepare schedules for (1) expected collections from customers and (2) expected payments for directed materials purchases for January and February B)Prepare a cash budget for January and February in columnar form
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 cash budgets. Relevant data from operating budgets for 2017 are as follows:
|
January |
February |
|||
| Sales | $417,600 | $464,000 | ||
| Direct materials purchases | 139,200 | 145,000 | ||
| Direct labor | 104,400 | 116,000 | ||
| Manufacturing |
81,200 | 87,000 | ||
| Selling and administrative expenses | 91,640 | 98,600 |
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. Sixty percent (60%) 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 above are paid in the month incurred except for selling and administrative expenses that include $1,160 of
Other data:
| 1. | Credit sales: November 2016, $290,000 ; December 2016, $371,200. | |
| 2. | Purchases of direct materials: December 2016, $116,000. | |
| 3. | Other receipts: January—Collection of December 31, 2016, notes receivable $17,400; | |
| February—Proceeds from sale of securities $6,960. | ||
| 4. | Other disbursements: February—Payment of $6,960 cash dividend. |
The company’s cash balance on January 1, 2017, is expected to be $69,600. The company wants to maintain a minimum cash balance of $58,000.
A) Prepare schedules for (1) expected collections from customers and (2) expected payments for directed materials purchases for January and February
B)Prepare a
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