Danner Company expects to have a cash balance of $47,880 on January 1, 2017. Rel

Question

Danner Company expects to have a cash balance of $47,880 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows.

Sales of marketable securities in January are expected to realize $12,768 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $26,600. The company wants to maintain a minimum monthly cash balance of $21,280.

Prepare a cash budget for January and February.

Collections from customers: January $90,440, February $159,600. Payments for direct materials: January $53,200, February $79,800. Direct labor: January $31,920, February $47,880. Wages are paid in the month they are incurred. Manufacturing overhead: January $22,344, February $26,600. These costs include depreciation of $1,596 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $15,960, February $21,280. These costs are exclusive of depreciation. They are paid as incurred.

Explanation / Answer

Answer:-

Danner Company Cash Budget Particulars January February $ $ Opening cash balance 47880 29260 Collections from customers 90440 159600 Sale of securities 12768 0 Total cash availble 151088 188860 Less:- Cash payments Direct material 53200 79800 Direct labor 31920 47880 Manufacturing overhead 20748 25004 Selling & administrative expenses 15960 21280 Closing cash balance 29260 14896 Minimum cash balance required 21280 Borrowing required $21280-$14896 =$6384

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