The treasure of Unisyms Company has accumulated the following budget information
ID: 2375790 • Letter: T
Question
The treasure of Unisyms Company has accumulated the following budget information for the first two months of the coming year:
March April
Sales $450,000 $520,000
Manufacturing $290,000 $350,000
Selling & Admin. expenses $41,000 $46,4000
Capital additions $250,000 -------
The company expects to sell about 35% of its merchandise for cash of sales on account 80% are expected to be collected in full in the month of the sale and remainder in the month following the sale. One-fourth of the manufacturing costs are expected to be paid in the month in which they are incurred and the other three-fourth in the following month. Depreciation, insurance, and property taxes represents $64,400 of the probable monthly selling and administrative expenses. Insurance is paid in April. Of the remainder of the selling and administrative expenses, one-half are expected to be paid in the month in which they are incurred, with the balance paid in the following month. Capital additions of $250,000 are expected to be paid in March. Current assets of March 1 are composed of accounts payable of $121,500($102,2000 for materials purchases and $19,5000 for operating expenses). Management desires to maintain a minimum cash balance of $20,000.
Prepare a monthly cash budget for March and April. Include separate schedules for Accounts Receivable collections and Payments of Manufacturing Costs
Explanation / Answer
Monthly cash budget for March and April. ============================================ March April Budgeted Cash Receipts : Cash Sales $450,000 x 35% $157,500 $520,000 x 35% $182,000 Collections of A/R ($450,000x65%x80%) + $51,000 $285,000 ($520,000x65%x80%) + ($450,000x65%x20%) $328,900 Total Receipts $442,500 $510,900 Budgeted Cash Payments Manufacturing costs ($290,000 x1/4)+$102,000 $174,500 ($350,000x1/4)+($290,000x3/4) $305,000 Selling & Administrative expenses ($41,400-$6,400)/2 + $19,500 $37,000 ($46,400-$6,400)/2 + $19,500 $37,500 Capital additions $250,000 ---- Income Taxes ---- $40,000 Total Cash payments $461,500 $382,500 Cash Increase / (decrease) ($19,000) $128,400 Beginning cash balance $45,000 $26,000 Ending cash balance $26,000 $154,400 Minimum Cash balance required $20,000 $20,000 Excess / (deficiency) $6,000 $134,400
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