Question
Below are data from Peekay Chewing Gum Company's operating budgets. The company's financial year ends on 30 June. Quarter 1 Quarter 2 Sales $248,470 $251,539
Below are data from Peekay Chewing Gum Company's operating budgets. The company's financial year ends on 30 June.
Quarter 1 | Quarter 2 | |
Sales | $248,470 | $251,539 |
Direct material purchases | 120,295 | 128,832 |
Direct labor | 76,500 | 74,000 |
Manufacturing overhead | 28,000 | 25,400 |
Selling and administration expenses | 33,500 | 33,500 |
Collection from customers | 230,500 | 220,000 |
Cash payments for purchases | 114,000 | 118,000 |
Additional data:
Equipment was sold in July for $9,000 and $5,500 in November. Dividends of $6,500 were paid in August. 20% of the selling and administration expenses relate to depreciation expenses. The beginning cash balance was $80 000 and a required minimum cash balance per quarter is $60,000.
The company has a 15% open line of credit for $70 000 with their bank.
Required:
a) Use this information to prepare cash budget for the first two quarters of the year.
b) Briefly comment on Peekay Chewing Gum Company's expected cashflow position in the first two quarters of the year
c) Explain how a flexible budget can overcome the weakness of a static budget
please answer it in detail anc clearly otherwise i will definitely go to customer support
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