Haas Company prepares monthly cash budgets. Relevant data from operating budg- ets for 2011 are: January $350,000 February $400,000 130,000 Sales Direct materials purchases Direct labor 110,000 90,000 70,000 100,000 Manufacturing overhead Selling and administrative expenses 75,000 79,000 86,000 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. 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 $1,000 of depreciation per month. Other data: 1. Credit sales: November 2010, $260,000; December 2010, $320,000. 2. Purchases of direct materials: December 2010, $100,000. 3. Other receipts: January-Collection of December 31, 2010, notes receivable $15,000; February-Proceeds from sale of securities $6,000. 4. Other disbursements: February-Withdrawal of $5,000 cash for personal use of owner, Dewey Yaeger. The company's cash balance on January 1, 2011, is expected to be $60,000. 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. (b) Prepare a cash budget for January and February in columnar form. Fe
Haas Company prepares monthly cash budgets. Relevant data from operating budg- ets for 2011 are: January $350,000 February $400,000 130,000 Sales Direct materials purchases Direct labor 110,000 90,000 70,000 100,000 Manufacturing overhead Selling and administrative expenses 75,000 79,000 86,000 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. 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 $1,000 of depreciation per month. Other data: 1. Credit sales: November 2010, $260,000; December 2010, $320,000. 2. Purchases of direct materials: December 2010, $100,000. 3. Other receipts: January-Collection of December 31, 2010, notes receivable $15,000; February-Proceeds from sale of securities $6,000. 4. Other disbursements: February-Withdrawal of $5,000 cash for personal use of owner, Dewey Yaeger. The company's cash balance on January 1, 2011, is expected to be $60,000. 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. (b) Prepare a cash budget for January and February in columnar form. Fe
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
Transcribed Image Text:Haas Company prepares monthly cash budgets. Relevant data from operating budg-
ets for 2011 are:
January
February
Sales
$350,000
110,000
90,000
70,000
79,000
$400,000
130,000
Direct materials purchases
Direct labor
100,000
Manufacturing overhead
Selling and administrative expenses
75,000
86,000
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. 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 $1,000 of depreciation per month.
Other data:
1. Credit sales: November 2010, $260,000; December 2010, $320,000.
2. Purchases of direct materials: December 2010, $100,000.
3. Other receipts: January-Collection of December 31, 2010, notes receivable $15,000;
February-Proceeds from sale of securities $6,000.
4. Other disbursements: February-Withdrawal of $5,000 cash for personal use of owner,
Dewey Yacger.
The company's cash balance on January 1,2011, is expected to be $60,000. 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.
(b) Prepare a cash budget for January and February in columnar form.
FeL
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