January February (a) Expected Collections from Customers January February Expect

Question

January

February

(a)

Expected Collections from Customers

January

February

Expected Payments for Direct Materials

January

February

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are:

January

February

Sales $410,900 $469,600 Direct materials purchases 129,140 152,620 Direct labor 105,660 117,400 Manufacturing overhead 82,180 88,050 Selling and administrative expenses 92,746 100,964
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,174 of depreciation per month.

Other data:
1. Credit sales: November 2013, $305,240; December 2013, $375,680. 2. Purchases of direct materials: December 2013, $117,400. 3. Other receipts: January—Collection of December 31, 2013, notes receivable $17,610;                       February—Proceeds from sale of securities $7,044. 4. Other disbursements: February—Payment of $5,870 cash dividend.
The company’s cash balance on January 1, 2014, is expected to be $70,440. The company wants to maintain a minimum cash balance of $58,700.

Explanation / Answer

Expected Collections from Customers Calculations January February January February November 61048 =305240*20% December 112704 75136 =375680*30% =375680*20% January 205450 123270 =410900*50% =410900*30% February 234800 =469600*50%     Total collections 379202 433206 Expected Payments for Direct Materials January February December 46960 =117400*40% January 77484 51656 =129140*60% =129140*40% February 91572 =152620*60%     Total payments 124444 143228

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