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 2017 are as follows:

January

February

Sales $381,600 $424,000 Direct materials purchases 127,200 132,500 Direct labor 95,400 106,000 Manufacturing overhead 74,200 79,500 Selling and administrative expenses 83,740 90,100
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 $1,060 of depreciation per month.

Other data:
1. Credit sales: November 2016, $265,000; December 2016, $339,200. 2. Purchases of direct materials: December 2016, $106,000. 3. Other receipts: January—Collection of December 31, 2016, notes receivable $15,900;                       February—Proceeds from sale of securities $6,360. 4. Other disbursements: February—Payment of $6,360 cash dividend.
The company’s cash balance on January 1, 2017, is expected to be $63,600. The company wants to maintain a minimum cash balance of $53,000.

Explanation / Answer

Expected Collections from the customers November December January February Sales 309140 380480 416150 475600 Collections 50% 154570 190240 208075 237800 30% 92742 114144 124845 20% 61828 76096 Total 384047 438741 Payment of Direct Material Purchase 118900 130790 154570 60% 71340 78474 92742 40% 47560 52316 Payments for direct material 126034 145058 Cash Budget January February Opening Balance 71340 347188 Receipts from Customers 384047 438741 Payment to customers -126034 -145058 Other Receipts 17835 7134 Other Payments -5945 Cl. Cash 347188 642060

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