Question

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2020 are as follows.

		January		February
Sales		$435,600		$484,000
Direct materials purchases		145,200		151,250
Direct labor		108,900		121,000
Manufacturing overhead		84,700		90,750
Selling and administrative expenses		95,590		102,850

All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,210 of depreciation per month.

Other data:

1.		Credit sales: November 2019, $302,500; December 2019, $387,200.
2.		Purchases of direct materials: December 2019, $121,000.
3.		Other receipts: January—Collection of December 31, 2019, notes receivable $18,150;
		February—Proceeds from sale of securities $7,260.
4.		Other disbursements: February—Payment of $7,260 cash dividend.

The company’s cash balance on January 1, 2020, is expected to be $72,600. The company wants to maintain a minimum cash balance of $60,500.

b) Prepare a cash budget for January and February in columnar form.

Answer 1

The cash budget of January and February are as given: