Production in units

Jan-25000

Feb-30000

March-32000

April-40000

1. The product sells for $18 per unit. Twenty-five per cent of the customers are expected to pay in the month of sale and take a 3 per cent discount; 70 per cent are expected to pay in the month following sale. The remaining 5 per cent will never pay.

2.It takes 2 kilograms of materials to produce a unit of product. The materials cost $0.75 per kilogram. In January, no raw materials are in beginning inventories, but managers want to end each month with enough materials for 20 per cent of the next months production. The entity pays for 60 per cent of its materials purchases in the month of purchase and 40 per cent in the following month.

3. It takes 0.5 hour of labour to produce each unit. Labour is paid $15.00 per hour and is paid in the same month as worked. Overhead is estimated to be $2.00 per unit plus $25 000 per month (including depreciation of $12 000). Overhead costs are paid as incurred.

4.Maryborough will begin January with no finished goods or work in process inventory. The managers wish to end each month with 25 per cent of the following months sales in finished goods inventory. They will end each month with no work in process.

Question : Prepare a cash budget listing cash receipts and disbursements for February. The entity will begin February with a cash balance of $80 000.