Exercise 21-14

Danner Company expects to have a cash balance of $63,526 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows.

Collections from customers: January $117,385, February $207,150.

Payments for direct materials: January $69,050, February $96,670.

Direct labor: January $41,430, February $62,145. Wages are paid in the month they are incurred.

Manufacturing overhead: January $29,001, February $34,525. These costs include depreciation of $1,381 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $20,715, February $27,620. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $13,810 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $34,525. The company wants to maintain a minimum monthly cash balance of $27,620. Prepare a cash budget for January and February.