Coronado Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows. January February Sales $331,200 $368,000 Direct materials purchases 110,400 115,000 Direct labor 82,800 92,000 Manufacturing overhead 64,400 69,000 Selling and administrative expenses 72,680 78,200 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 $920 of depreciation per month. Other data: 1. Credit sales: November 2021, $230,000; December 2021, $294,400. 2. Purchases of direct materials: December 2021, $92,000. 3. Other receipts: January—Collection of December 31, 2021, notes receivable $13,800; February—Proceeds from sale of securities $5,520. 4. Other disbursements: February—Payment of $5,520 cash dividend. The company’s cash balance on January 1, 2022, is expected to be $55,200. The company wants to maintain a minimum cash balance of $46,000. 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.
Coronado Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows.
|
January
|
February
|
|||
|---|---|---|---|---|
| Sales | $331,200 | $368,000 | ||
| Direct materials purchases | 110,400 | 115,000 | ||
| Direct labor | 82,800 | 92,000 | ||
| Manufacturing overhead | 64,400 | 69,000 | ||
| Selling and administrative expenses | 72,680 | 78,200 |
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 $920 of
Other data:
| 1. | Credit sales: November 2021, $230,000; December 2021, $294,400. | |
| 2. | Purchases of direct materials: December 2021, $92,000. | |
| 3. | Other receipts: January—Collection of December 31, 2021, notes receivable $13,800; | |
| February—Proceeds from sale of securities $5,520. | ||
| 4. | Other disbursements: February—Payment of $5,520 cash dividend. |
The company’s cash balance on January 1, 2022, is expected to be $55,200. The company wants to maintain a minimum cash balance of $46,000. Prepare a
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