Presented below are selected budget data items for Globe Corporation for a three

Question

Presented below are selected budget data items for Globe Corporation for a three-month period: OCTOBER NOVEMBER DECEMBER Sales $     820,000 $      780,000 $    850,000 Direct materials          123,000           119,000        125,000 Direct labor            90,000           850,000           96,000 Variable overhead            65,600             62,400           68,000 Fixed overhead          140,000           140,000        140,000 Selling and admin costs          312,000           310,000        315,000 Fixed loan payments          155,000           155,000        155,000 Sales were $770,000 in August and $790,000 in September. Material usage was $115,000 in August and $118,000 in September. All sales are on account, and accounts receivable is historically collected 15% in the month of sale, 65% in the month following sales, and the remainder two months after the sale. Materials are paid for 40% in the month used and 60% the following month. All other expenses are paid in the month incurred. The cash balance was $35,000 at the beginning of October, and management wants to determine if the company will have enough cash to pay a year-end bonus. Required: Prepare a three-month cash budget, including schedules for cash collections and direct materials payments. Presented below are selected budget data items for Globe Corporation for a three-month period: OCTOBER NOVEMBER DECEMBER Sales $     820,000 $      780,000 $    850,000 Direct materials          123,000           119,000        125,000 Direct labor            90,000           850,000           96,000 Variable overhead            65,600             62,400           68,000 Fixed overhead          140,000           140,000        140,000 Selling and admin costs          312,000           310,000        315,000 Fixed loan payments          155,000           155,000        155,000

Explanation / Answer

Cash Budget August September October November December Sales 770000 790000 820000 780000 850000 Cash Collections Same month 15% 115500 118500 123000 117000 127500 Next Month 65% 500500 513500 533000 507000 two months 20% 154000 158000 164000 Total 115500 619000 790500 808000 798500 Material 115000 118000 123000 119000 125000 Same month 40% 46000 47200 49200 47600 50000 Next Month 60% 69000 70800 73800 71400 Total Payments 46000 116200 120000 121400 121400 Cash Budget October November December Beginning 35000 -57100 Cash from sales 790500 808000 798500 Payments fpr material -120000 -121400 -121400 Direct labor -90000 -85000 -96000 Variable Overhead -65600 -62400 -68000 Fixed Overhead -140000 -140000 -140000 Selling & Admin -312000 -310000 -315000 Fixed Loan Payments -155000 -155000 -155000 Excess/ Deficit -57100 -122900 -96900

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