Danner Company expects to have a cash balance of $58,185 on January 1, 2017. Rel

Question

Danner Company expects to have a cash balance of $58,185 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows.

Collections from customers: January $109,905, February $193,950.

Payments for direct materials: January $64,650, February $96,975.

Direct labor: January $38,790, February $58,185. Wages are paid in the month they are incurred.

Manufacturing overhead: January $27,153, February $32,325. These costs include depreciation of $1,939 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $19,395, February $25,860. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $15,516 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $32,325. The company wants to maintain a minimum monthly cash balance of $25,860.

Prepare a cash budget for January and February.

Explanation / Answer

Danner Company Cash Budget January February Cash Balance, Beginning $     58,185 $     54,952 Add: Collections from customers $ 1,09,905 $ 1,93,950 Add: sale of security $     15,516 $                 - Total Cash Available $ 1,83,606 $ 2,48,902 Less: Disbursment Direct meterial $     64,650 $     96,975 Direct Labour $     38,790 $     58,185 Manufactoring overhead (Less: $1,939) $     25,214 $     30,386 Total Disbursments $ 1,28,654 $ 1,85,546 Excess (Deficiency) of cash available over disbursments $     54,952 $     63,356 Financing Borrowings Repayments Total Financing $                 - $                 - Cash Balance, Ending $     54,952 $     63,356

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