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.

As to cash payments (disbursements):

30% of direct materials purchases are paid in cash in the month of purchase,

70% 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 & admin 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:

Jan - collection of Dec 31, 2016, interest receivable $3,000;

Feb - proceeds from sale of securities $5,000.

4. Other disbursements: Feb - payment of $20,000 for land.

The company's cash balance on January 1, 2017, is expected to be $50,000. The company wants to maintain a minimum cash balance of $40,000.

Instructions

(a)Prepare schedules for:

(1) expected collections from customers and

(2) expected payments for direct materials purchases.

(b) Prepare a cash budget for January and February in columnar form.