Martin Company expects to have a cash balance of $135,000 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows: Collections from customers: January $246,500, February $435,000. Payments for direct materials: January $155,000, February $240,000 Direct labor: January $90,000, February $135,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $63,000, February $75,000. These costs include depreciation of $5,000 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $45,000, February $60,000. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $36,000 in cash. Martin Company has a line of credit at the local bank that enables it to borrow up to $75,000. The company wants to maintain a minimum monthly cash balance of $60,000. Instructions (a) (b) Prepare a cash budget for January and February. Martin Company's chief financial officer feels that it is important to have data for the entire quarter especially since their financial forecasts indicate some difficult economic periods in the coming year. March information has been budgeted as follows: Collections from customers: $375,000 Payments for direct materials: $206,000 Direct labor: Wages paid in March $116,000 Manufacturing overhead: $64,500. This includes the monthly depreciation of $5,000. Selling and administrative expenses: $51,600. This cost is exclusive of depreciation. Marketable securities of $50,000 can be sold if needed for additional cash. (1) Prepare a cash budget for March assuming that the company does not sell the marketable securities. (2) Prepare a cash budget for March assuming that the company sells the marketable securities
Martin Company expects to have a cash balance of $135,000 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows: Collections from customers: January $246,500, February $435,000. Payments for direct materials: January $155,000, February $240,000 Direct labor: January $90,000, February $135,000. Wages are paid in the month they are incurred. Manufacturing overhead: January $63,000, February $75,000. These costs include depreciation of $5,000 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $45,000, February $60,000. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $36,000 in cash. Martin Company has a line of credit at the local bank that enables it to borrow up to $75,000. The company wants to maintain a minimum monthly cash balance of $60,000. Instructions (a) (b) Prepare a cash budget for January and February. Martin Company's chief financial officer feels that it is important to have data for the entire quarter especially since their financial forecasts indicate some difficult economic periods in the coming year. March information has been budgeted as follows: Collections from customers: $375,000 Payments for direct materials: $206,000 Direct labor: Wages paid in March $116,000 Manufacturing overhead: $64,500. This includes the monthly depreciation of $5,000. Selling and administrative expenses: $51,600. This cost is exclusive of depreciation. Marketable securities of $50,000 can be sold if needed for additional cash. (1) Prepare a cash budget for March assuming that the company does not sell the marketable securities. (2) Prepare a cash budget for March assuming that the company sells the marketable securities
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please complete the instructional questions (a) and (b) so I can check my work. Thank you.
-Mitch
Transcribed Image Text:Martin Company expects to have a cash balance of $135,000 on January 1, 2017. Relevant
monthly budget data for the first 2 months of 2017 are as follows:
Collections from customers: January $246,500, February $435,000.
Payments for direct materials: January $155,000, February $240,000
Direct labor: January $90,000, February $135,000. Wages are paid in the month they
are incurred.
Manufacturing overhead: January $63,000, February $75,000. These costs include
depreciation of $5,000 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $45,000, February $60,000. These costs
are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $36,000 in cash.
Martin Company has a line of credit at the local bank that enables it to borrow up to
$75,000. The company wants to maintain a minimum monthly cash balance of $60,000.
Instructions
(a)
(b)
Prepare a cash budget for January and February.
Martin Company's chief financial officer feels that it is important to have data for the
entire quarter especially since their financial forecasts indicate some difficult economic
periods in the coming year. March information has been budgeted as follows:
Collections from customers: $375,000
Payments for direct materials: $206,000
Direct labor: Wages paid in March $116,000
Manufacturing overhead: $64,500. This includes the monthly depreciation of
$5,000.
Selling and administrative expenses: $51,600. This cost is exclusive of
depreciation.
Marketable securities of $50,000 can be sold if needed for additional cash.
(1) Prepare a cash budget for March assuming that the company does not sell the
marketable securities.
(2) Prepare a cash budget for March assuming that the company sells the marketable
securities
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