Danner Company expects to have a cash balance of $46,966 on January 1, 2014. Rel

Question

Danner Company expects to have a cash balance of $46,966 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows. Collections from customers: January $86,785, February $153,150. Payments for direct materials: January $51,050, February $71,470. Direct labor: January $30,630, February $45,945. Wages are paid in the month they are incurred. Manufacturing overhead: January $21,441, February $25,525. These costs include depreciation of $1,021 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $15,315, February $20,420. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $10,210 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $25,525. The company wants to maintain a minimum monthly cash balance of $20,420. Prepare a cash budget for January and February.

Explanation / Answer

Danner Company Cash Budget For the Two Months ending February 28, 2014 Jannuary February Beginning Cash Balance 46,966 25,525 ADD: Receipts: Colletions from customers 86,785 153,150 Sale of marketable securities 10,210 0 Total Receipts 96,995 153,150 Total cash available 143,961 178,675 LESS: Disbursements Direct Labor 30,630 45,945 Direct Materials 51,050 71,470 Manufacturing overheads 21,441 25,525 Selling and administrative expenditure. 15,315 20,420 Total Disbursements 118,436 163,360 Excess/(Deficiency) of cash available over cash disbursements Financing 25,525 15,315 Borrowings($25525-15315) 10,210 Repayments Ending cash balance 25,525 25,525

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