Clay Corporation has projected sales and production in units for the second quar

Question

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows:

Cash-related production costs are budgeted at $7.0 per unit produced. Of these production costs, 30% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $300,000 per month. The accounts payable balance on March 31 totals $390,000, which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation.

Assume that all units are sold on account for $16.0 each. Cash collections from sales are budgeted at 65% in the month of sale, 25% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $720,000 ($110,000 from February's sales and $610,000 from March’s sales) Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation. (Do not round intermediate calculations.)

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows:

Explanation / Answer

1) Schedule for budgeted cash disbursements:

=490000*30%

=$147000(of april)

=420000*30%

=126000(of may)

=420000*30%

=126000(of june)

=490000*70%

=343000(of april)

=420000*70%

=294000(of may)

2)Schedule for budgeted cash receipts:

NOTE: For the month of June,units sold will be taken as 60000 units because only 60,000 units have been produced.

=1120000*65%

=728000(of april)

=960000*65%

=624000(of may)

=960000*65%

=624000(of june)

=1120000*25%

=280000(of april)

=960000*25%

=240000(of may)

=1120000*10%

=112000(of april)

NOTE: It is assumed that Accounts receivable of $720000 will be realised in the month of April only.

Particulars April May June Units produced 70000 60000 60000 Cost per unit $7 $7 $7 Total Cost $490,000 $420,000 $420,000

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