Hawkeye Company prepares monthly cash budgets. Here are relevant data from operating budgets for 2001:

All sales are on account. Collections are expected to be 50% in the month of sale, 40%
in the first month following the sale, and 10% in the second month following the sale.
Fifty percent (50%) 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 are listed here:
1. Credit sales—November 2000, $260,000; December 2000, $300,000.
2. Purchases of direct materials—December 2000, $100,000.
3. Other receipts—January: collection of December 31, 2000, notes receivable $10,000;
February: proceeds from sale of securities $6,000.
4. Other disbursements—February: $8,000 cash dividend.
The company’s cash balance on January 1, 2001, is expected to be $60,000. Hawkeye wants to maintain a minimum cash balance of $60,000.
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.

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January February Sales $370,000 $420,000 Direct materials purchases 120,000 130,000 Direct labor 80,000 95,000 Manufacturing overhead 70,000 75,000 Selling and administrative expenses 79,000 86,000