Question

Question 2

For the second quarter of the following year Cloaks Company has projected sales and production in units as follows:
Jan Feb Mar
Sales 58,000 60,000 65,000
Production 62,000 57,000 58,000
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. $190,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $230,000, 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 $650,000 ($120,000 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

Calculation of budgeted sales
Particulars	January	February	March
Units to be sold	58,000	60,000	65,000
Selling price per unit	$12	$12	$12
Budgeted sales	$696,000	$720,000	$780,000
Calculation of budgeted cost of production
Particulars	January	February	March
Units to be produced	62,000	57,000	58,000
Cost per unit	$8	$8	$8
Budgeted cost of production	$496,000	$456,000	$464,000
1. Schedule showing budgeted cash disbursements
Particulars	January	February	March
Cash payment for production cost:
for the previous months (60% of the previous month's cost)	$230,000	$297,600	$273,600
for the current month (40% of the corrent month's cost)	$198,400	$182,400	$185,600
Cash payment for selling and administrative expenses	$190,000	$190,000	$190,000
Total cash disbursement	$618,400	$670,000	$649,200
2. Schedule showing budgeted cash receipts
Particulars	January	February	March
Cash receipts from customers:
from November's sales	$120,000
from December's sales ($650,000 - $120,000)	$265,000	$265,000
from January's sales	$417,600	$139,200	$139,200
from February's sales		$432,000	$144,000
from March's sales			$468,000
Total cash receipts	$8,02,600	$8,36,200	$7,51,200