CHAPTER 14

Betty DeRose, Inc. manufactures a single product.The company is in the process of preparing its 2009

master budget and has the following information available:

(1)The company has budgeted the following sales (all sales are made on account):

January

February

March

Expected sales

$500,000 J

$525,000 F

$400,000 M

Sales are collected in the pattern 60 percent in the month of sale, 25 percent in the first month after

the sale, and 15 percent collected in the second month after the sale.Total sales in November and

December, 2008 were $425,000 and $375,000, respectively.

(2)From its production budget, the company has budgeted the following units to be produced:

January

February

March

Units to be produced

34,000

28,000

20,000

Each unit produced requires 10 pounds of raw materials.Betty desires her ending raw materials

inventory for each month to be equal to 25% of the next month's production needs.Assume that

26,000 units are budgeted to be produced in April.Raw materials are purchased at $0.60 per pound.

Raw material purchases are paid in full during the month following purchase.Raw materials

purchased in December, 2008 totaled $200,000.

(3)The company expects to incur the following monthly costs in 2009 (all costs are paid in the month

they are incurred):

January

February

March

Direct labor

$65,000 J

$85,000 F

$105,000 M

Overhead

140,000 J

140,000 F

140,000 M

S&A expenses

100,000 J

100,000 F

100,000 M

The budgeted overhead includes $20,000 per month in depreciation and the budgeted selling &

administrative costs include $10,000 per month in depreciation.

(4)Betty wants to maintain a cash balance of $20,000 at the end of each month.Any excess funds will

be used to repay loans while Betty will need to borrow funds if she is short of the $20,000 at the end

of any given month.At January 1, 2009, Betty had $20,000 of cash on hand.

REQUIRED:Prepare a cash budget for January - March, 2009