Presented below are selected budget data items for Globe Corporation for a three

Question

Presented below are selected budget data items for Globe Corporation for a three-month period:

Sales were $770,000 in August and $790,000 in September. Material usage was $115,000 in August and $118,000 in September. All sales are on account, and accounts receivable is historically collected 15% in the month of sale, 65% in the month following sales, and the remainder two months after the sale. Materials are paid for 40% in the month used and 60% the following month. All other expenses are paid in the month incurred. The cash balance was $35,000 at the beginning of October, and management wants to determine if the company will have enough cash to pay a year-end bonus.

Prepare a three-month cash budget, including a schedule for cash collections and material payments.

Sales
Direct materials
Direct labor
Variable overhead
Fixed overhead
Selling and admin. costs
Fixed loan payments OCTOBER
$820,000
$123,000
$90,000
$65,600
$140,000
$312,000
$155,000 NOVEMBER
$780,000
$119,000
$85,000
$62,400
$140,000
$310,000
$155,000 DECEMBER
$850,000
$125,000
$96,000
$68,000
$140,000
$315,000
$155,000

Explanation / Answer

schedule for cash collections and material payments. Particulars OCTOBER NOVEMBER DECEMBER Sales Collection of August 154000 0 0 Sales Collection of September 513500 158000 0 Sales Collection of October $123,000 $533,000 $164,000 Sales Collection of October $117,000 $507,000 $156,000 Sales Collection of December $127,500 $552,500 $170,000 Total Realization of Accounts receivable $1,035,000 $1,750,500 $490,000 Amount paid for Direct materials used in August 0 0 0 Amount paid for Direct materials used in September 70800 0 0 Amount paid for Direct materials used in October $49,200 $73,800 0 Amount paid for Direct materials used in November 0 $47,600 $71,400 Amount paid for Direct materials used in December 0 0 $50,000 Total Amount paid for Direct materials 120000 121400 121400 Cash Budget Particulars OCTOBER NOVEMBER DECEMBER Opening Balances 35000 $187,400 $1,064,100 Add: Collection from Accounts receivable $1,035,000 $1,750,500 $490,000 Less: Amount paid for direct material 120000 121400 121400 Direct labor $90,000 $85,000 $96,000 Variable overhead $65,600 $62,400 $68,000 Fixed overhead $140,000 $140,000 $140,000 Selling and admin. costs $312,000 $310,000 $315,000 Fixed loan payments $155,000 $155,000 $155,000 Closing Balance $187,400 $1,064,100 $658,700 Note: All expenses other than incurred in direct material are paid in the same month. so they are taken in same month in cash budget

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.