PART C

Roans manufacturing is preparing its cash budget for the first two months of the upcoming year. The following information concerns the companys upcoming cash receipts and disbursements.

• Sales are 65% cash and 35% credit. Credit sales are collected 30% in the month of sale and the remainder in the month after the sale. Actual sales in December were $51,000.

• January sales are budgeted to be $60,000; February sales are budgeted to be $69,000

• Actual purchases of direct materials in December were $25,500. Roans purchases of direct materials in January are budgeted to be $23,500 and $28,000 in February. All purchases are paid 30% in the month of purchase and 70% the following month.

• Salaries and sales commissions are also paid 50% in the month earned (when the sales are made) and 50% the following month. Actual salaries in December were $8,000. Budgeted salaries for January are $9,000 and February budgeted salaries are $10,500. Sales commissions each month are 8% of that months sales.

• Rent expense is $3,300 per month

• Depreciation is $2,800 per month

• The cash balance at the end of the prior year was $18,000

• The company is required to maintain a cash balance of $10,000. If necessary, it can borrow in increments of $1,000 at 0% interest. So far, the company has not had to borrow.

Required:

1. Prepare a schedule of

1. cash collections
2. budgeted cash payments for purchases of direct materials
3. budgeted cash payments for operating expenses

2. Cash budget for January and February