Question

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:

	Jan	Feb	Mar
Sales	56,000	58,000	63,000
Production	60,000	55,000	56,000

Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. $170,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $210,000, which will be paid in February.

All units are sold on account for $12 each. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale. On January 1 accounts receivable totaled $630,000 ($100,000 from November’s sales and the remaining from December).

Required:

1. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company.   

2. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

Answer 1

Cloaks Company
Cash collection schedule
	Jan	Feb	Mar
Budgeted sales (Units)	56,000	58,000	63,000
selling price per unit	12	12	12
Total production cost	672,000	696,000	756,000
Accounts Receivable,	365,000	265,000
Cash collection in same month	403,200	417,600	453,600
Cash collection in next month		134,400	139,200
Cash collection in next following month			134,400
Total collection	768,200	817,000	727,200
Cloaks Company
Cash Disbursement schedule
	Jan	Feb	Mar
Budgeted Production (Units)	60,000	55,000	56,000
Production cost per unit	8	8	8
Total production cost	480,000	440,000	448,000
Accounts Payable, paid in Feb		210,000
Cash Disbursement in same month	192,000	176,000	179,200
Cash Disbursement in next month		288,000	264,000
Selling and admin expense	170,000	170,000	170,000
Total disbursement	362,000	844,000	613,200