Question
Relevant data from Picta Companys operating budgets are presented below. The companys financial year ends on 30 June. Quarter 1 Quarter 2 Sales $248,470 $251,539
Relevant data from Picta Companys operating budgets are presented below. The companys financial year ends on 30 June.
| Quarter 1 | Quarter 2 |
Sales | $248,470 | $251,539 |
Direct material purchases | 120,295 | 128,832 |
Direct labor | 76,553 | 74,289 |
Manufacturing overhead | 26,000 | 24,400 |
Selling and administration expenses | 33,500 | 33,500 |
Depreciation included in selling and administration expenses |
2,000 |
2,500 |
|
|
|
Collection from customers | 230,524 | 220,116 |
Cash payments for purchases | 114,345 | 118,346 |
Additional data:
Equipment was sold in July for $8,000 and $4,500 in November. Dividends of $5,500 were paid in August. The beginning cash balance was $80,395 and a required minimum cash balance per quarter is $60,000.
The company has a 15% open line of credit for $70 000 with their bank.
Required:
a) Use this information to prepare a cash budget for the first two quarters of the year. (5 marks)
bi) Briefly comment on Picta Companys expected cashflow position in the first two quarters of the year.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started