Question
Indigo Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows: January February Sales $352,000 $397,000 Direct materials purchases 122,000
Indigo Company prepares monthly cash budgets. Relevant data from operating budgets for 2023 are as follows:
January | February | |||
---|---|---|---|---|
Sales | $352,000 | $397,000 | ||
Direct materials purchases | 122,000 | 110,000 | ||
Direct labour | 86,000 | 113,000 | ||
Manufacturing overhead | 60,000 | 74,000 | ||
Selling and administrative expenses | 74,000 | 80,000 |
All sales are on account. Indigo expects collections to be 50% in the month of sale, 40% in the first month following the sale, and 10% in the second month following the sale. It pays 30% of direct materials purchases in cash in the month of purchase and the balance due in the month following the purchase. Other data are as follows:
1. | Credit sales: November 2022, $199,000; December 2022, $282,000 |
2. | Purchases of direct materials: December 2022, $89,000 |
3. | Other receipts: Januarycollection of December 31, 2022, notes receivable $4,000; Februaryproceeds from sale of securities $6,000 |
4. | Other disbursements: Februarypayment of $21,000 for land |
The company expects its cash balance on January 1, 2023, to be $50,000. It wants to maintain a minimum cash balance of $40,000.
Prepare schedules for (1) the expected collections from customers.
Month | January | February | |||
---|---|---|---|---|---|
November | $enter a dollar amount | $enter a dollar amount | |||
December | enter a dollar amount | enter a dollar amount | |||
January | enter a dollar amount | enter a dollar amount | |||
February | enter a dollar amount | enter a dollar amount | |||
$enter a total amount | $enter a total amount |
(2) the expected payments for direct materials purchases.
Month | January | February | |||
---|---|---|---|---|---|
December | $enter a dollar amount | $enter a dollar amount | |||
January | enter a dollar amount | enter a dollar amount | |||
February | enter a dollar amount | enter a dollar amount | |||
$enter a total amount | $enter a total amount |
Prepare a cash budget for January and February using columns for each month.
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