Problem 2 (40 marks) Intel Company prepares monthly cash budgets. The relevant data from the operating budgets for 2021 are as follows: January February Sales $350,000 $400,000 Direct materials purchases 120,000 110,000 Direct labour 85,000 112,000 Manufacturing overheads 60,000 75,000 Selling and Administrative expenses 75,000 80,000 All sales are on account. Intel 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 2020, $200,000: December 2020, $280,000 2. Purchases of direct materials : December 2020, $90,000 3. Other receipts: January - Collection of December 31, 2020, notes receivable $5,000: February - proceeds from sale of securities $6,000 4. Other disbursements: February - payment of $20,000 for land. The company expects its Cash balance on January 1, 2021 to be $50,000. It wants to maintain a minimum cash balance of $40,000. Instructions a. Prepare schedules for the expected collections from customers . The expected payments for direct materials purchases. b. Prepare a cash budget for January and February using columns for each month.Problem 1 (23 marks) Davidson's Company makes and sells chairs. The Controller is responsible for preparing the master budget and has accumulated the following information for the year. January February March April May Estimated Sales (units) 15,000 18,000 13.000 Sales Price per unit 14.000 14,000 585 $75 $75 $75 Direct labour hours per unit $75 2 2 1.5 1.5 Wage per direct labour hour 1.5 $18 518 $18 $20 520 Davidson Company has a labour contract that calls for a wage increase of $20 per hour on April 1. It has installed new labour-saving machinery, which will be fully operational by March 1. The company expects to begin the year with 24,000 chairs on hand and has a policy of carrying an end of month inventory of 100% of the following months sales plus 50% of the next month's sales. Instructions Prepare a production budget and a direct labour budget for the company, by month and for the first quarter of the year. The direct labour budget should include direct labour hours and show the detail for each direct labour cost category. For each item used in the production budget and its direct labour budget, identify the other components of the master budget that would also use this data
