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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

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

  1. Cash budget for January and February

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