Reference no: EM131577069

Assignment: Cash budget

This is a comprehensive problem all contained on this spreadsheet tab.

Cash Budget

Below is summary monthly income statement data for Ace Manufacturing Company.

January February
Sales revenue 275,000 250,000
Direct materials purchases 60,000 70,000
Direct labor 88,000 95,000
Manufacturing overhead 60,000 62,000
Selling and administrative expenses 45,000 46,000

All sales are on account, and history has shown that 40% of sales is expected to be collected in the month of the sale, with 60% collected the following month.

Direct materials are paid 50% in the month of purchase and 50% the following month. All other expenses are paid as incurred. All costs shown are cash-based costs (depreciation has already been eliminated).

Other data:

1. December sales were $240,000.
2. Purchases of direct materials purchased in December were $50,000.
3. The company has interest payments due of $5,000 per month.
4. The cash balance on January 1 was $15,000.

Instructions

A. Prepare schedules for expected collections from customers and expected payments for direct materials purchases.

B. Prepare a cash budget for January and February.