Question

Exercise 9-14 (Video)

Danner Company expects to have a cash balance of $48,600 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows.

Collections from customers: January $91,800, February $162,000.

Payments for direct materials: January $54,000, February $81,000.

Direct labor: January $32,400, February $48,600. Wages are paid in the month they are incurred.

Manufacturing overhead: January $22,680, February $27,000. These costs include depreciation of $1,620 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $16,200, February $21,600. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $12,960 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $27,000. The company wants to maintain a minimum monthly cash balance of $21,600.

Prepare a cash budget for January and February.

Answer 1

	Jan	Feb
Opening Cash	$          48,600	$          29,700
Add - Collections	$          91,800	$        162,000
Sales of marketable securities	$          12,960
Total Cash	$        153,360	$        191,700
Less - Payments
Payments for direct materials	$          54,000	$          81,000
Direct labor	$          32,400	$          48,600
Manufacturing overhead	$          21,060	$          25,380
Selling and administrative expenses	$          16,200	$          21,600
Total Payments	$        123,660	$        176,580
Net Cash	$          29,700	$          15,120
Financing	$                    -	$            6,480
Closing Cash	$          29,700	$          21,600