The University of Wisconsin and its subunits must prepare budgets. One unique subunit of the University of Wisconsin is Babcock Ice Cream, a functioning producer of dairy products (and famous, at least on campus, for its delicious ice cream).

Assume that Babcock Ice Cream prepares monthly cash budgets. Relevant data from assumed operating budgets for 2012 are:

January February

Sales $460,000 $412,000

Direct materials 185,000 210,000

purchases

Direct labor 70,00085,000

Manufacturing 50,000 65,000

overhead

Selling and 85,000 95,000

administrative expenses

Babcock sells its ice cream in shops on campus, as well as to local stores. Collections are expected to be 75% in the month of sale, and 25% in the month following sale. Babcock pays 60% of direct materials purchases in cash in the month of purchase, and the balance due in the month following the purchase. All other items above are paid in the month incurred. (Depreciation has been excluded from manufacturing overhead and selling and administrative expenses.)

Other data:

(1) Sales: December 2011, $320,000

(2) Purchases of direct materials: December 2011, $175,000

(3) Other receipts: JanuaryDonation received, $2,000 FebruarySale of used equipment, $4,000

(4) Other disbursements: FebruaryPurchased equipment, $10,000

(5) Repaid debt: January, $30,000

The company's cash balance on January 1, 2012, is expected to be $50,000. The company wants to maintain a minimum cash balance of $45,000.

Instructions

(a) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases.

(b) Prepare a cash budget for January and February in columnar form.