Laau Ltd. expects to have a cash balance of NT$450,000 on January 1, 2020. Relevant monthly budget

Question:

Laau Ltd. expects to have a cash balance of NT$450,000 on January 1, 2020. Relevant monthly budget data for the fi rst 2 months of 2020 are as follows.

Collections from customers: January NT$850,000, February NT$1,500,000.

Payments for direct materials: January NT$500,000, February NT$750,000.

Direct labor: January NT$300,000, February NT$450,000. Wages are paid in the month they are incurred.

Manufacturing overhead: January NT$210,000, February NT$250,000. These costs include depreciation of NT$15,000 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January NT$150,000, February NT$200,000. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize NT$120,000 in cash. Laau Ltd. has a line of credit at a local bank that enables it to borrow up to NT$250,000. The company wants to maintain a minimum monthly cash balance of NT$200,000.

Instructions

Prepare a cash budget for January and February.

Cash Budget
A cash budget is an estimation of the cash flows for a business over a specific period of time. These cash inflows and outflows include revenues collected, expenses paid, and loans receipts and payment. Its primary purpose is to provide the... Line of Credit
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...

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