Question
Below is summary monthly income statement data for Ace Manufacturing Company. January February Sales revenue $250,000 $275,000 Direct materials purchases 60,000 70,000 Direct labor 88,000
Below is summary monthly income statement data for Ace Manufacturing Company.
January February
Sales revenue $250,000 $275,000
Direct materials purchases 60,000 70,000
Direct labor 88,000 95,000
Manufacturing overhead 50,000 52,000
Selling and administrative expenses 45,000 46,000
All sales are on account, and history has shown that 40% of sales are 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 $230,000.
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.
Cash collections
Credit Sales January February
December Amount Amount Amount
January Amount Amount Amount
February Amount Amount Amount
Amount Amount
Cash disbursements for materials
Purchases January February
December Amount Amount Amount
January Amount Amount Amount
February Amount Amount Amount
Amount Amount Amount
Cash budget
January February
Beginning cash Amount Amount
Cash collections Amount Amount
Direct materials purchases Amount Amount
Direct labor Amount Amount
Manufacturing overhead Amount Amount
Selling and administrative expenses Amount Amount
Interest payment Amount Amount
Ending cash Amount Amount
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