-46 Derby Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are: January February Sales $350,000 $400,000 Direct materials purchases 110,000 120,000 Direct labor 85,000 115,000 Manufacturing overhead 60,000 75,000 Selling and administrative expenses 75,000 80,000 All sales are on account. Collections are expected to be 60% in the month of sale, 25% in the first month following the sale, and 15% in the second month following the sale. Thirty percent (30%) 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. Depreciation has been excluded from manufacturing over- head and selling and administrative expenses. Other data: 1. Credit sales: November 2016, $200,000; December 2016, $290,000. 2. Purchases of direct materials: December 2016, $90,000. 3. Other receipts: January-collection of December 31, 2016, interest receivable $3,000; February-proceeds from sale of securities $5,000. 4. Other disbursements: February-payment of $20,000 for land. The company's cash balance on January 1, 2017, is expected to be $50,000. The com- pany wants to maintain a minimum cash balance of $40,000. Instructions (a) Prepare schedules for (1) expected collections from customers and (2) expected pay- ments for direct materials purchases. (b) Prepare a cash budget for January and February in columnar form