Clay Corporation has projected sales and production in units for the second quar
ID: 2450954 • Letter: C
Question
Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows:
a. Cash-related production costs are budgeted at $5.6 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $160,000 per month. The accounts payable balance on March 31 totals $250,000, which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation.
b. Assume that all units are sold on account for $14.6 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% 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 $566,000 ($96,000 from February's sales and $470,000 from March’s sales) Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation. (Do not round intermediate calculations.)
April May June Sales 56,000 46,000 66,000 Production 63,000 53,000 53,000Explanation / Answer
April
May
June
Production cost
352800
296800
296800
cash disbursement:
-------
------
------
Production cost this month
141120
118720
118720
Production cost prior month
250000
211680
178080
Selling and administrative
160000
160000
160000
Total disbursements
551120
490400
456800
b.
April
May
June
Total sales
817600
671600
963600
Cash receipts:
-------
------
-----
February sales
96000
March sales
352500
117500
April sales
490560
245280
81760
May sales
402960
201480
June sales
578160
Total receiptS
939060
765740
861400
Working Notes:
1.All outstanding amount of feb must be 10% of feb sales, whole of which will be collected in April as per the policy
2. Amount outstanding of mar must be remaining 40% of sales, 30% of which will be collected in April and 10% in may
3.Remaining Amount of May and June Sales will be collected in the subsequent months.
April
May
June
Production cost
352800
296800
296800
cash disbursement:
-------
------
------
Production cost this month
141120
118720
118720
Production cost prior month
250000
211680
178080
Selling and administrative
160000
160000
160000
Total disbursements
551120
490400
456800
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