Danner Company expects to have a cash balance of $54,326 on January 1, 2014. Rel

Question

Danner Company expects to have a cash balance of $54,326 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows.

Sales of marketable securities in January are expected to realize $11,810 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $29,525. The company wants to maintain a minimum monthly cash balance of $23,620.

Prepare a cash budget for January and February.

Collections from customers: January $100,385, February $177,150. Payments for direct materials: January $59,050, February $82,670. Direct labor: January $35,430, February $53,145. Wages are paid in the month they are incurred. Manufacturing overhead: January $24,801, February $29,525. These costs include depreciation of $1,181 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $17,715, February $23,620. These costs are exclusive of depreciation. They are paid as incurred.

Explanation / Answer

Solution:

DANNER COMPANY Cash Budget For the two months ending February January February Beginning cash balance 54,326 30706 Add: Receipts Collections from customers 100385 177150 Sale of marketable securities 11810 0 Total receipts 112195 177150 Total available cash 166,521 207,856 Less: Disbursements Direct material 59050 82670 Direct labor 35430 53145 Manufacturing overhead 23620 28344 Selling and administrative expenses 17715 23620 Total disbursements 135815 187779 Excess (deficiency) 30,706 20,077 Financing Add: Borrowings 0 3,543 Less: Repayments 0 0 Ending cash balance 30,706 23,620

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