Question

Built-Tight is preparing its master budget for the quarter ended September 30, 2017. Budgeted sales and cash payments for product costs for the quarter follow: July August September Budgeted sales $ 60,000 $ 76,000 $ 52,000 Budgeted cash payments for Direct materials 16,960 14,240 14,560 Direct labor 4,840 4,160 4,240 Factory overhead 21,000 17,600 18,000 Sales are 30% cash and 70% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $45,800 in accounts receivable; $5,300 in accounts payable; and a $5,800 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($4,800 per month), and rent ($7,300 per month). (2) Prepare a cash budget for each of the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.)

Answer 1

	July	August	September
Cash Sales	$     18,000	$         22,800	$      15,600	30% of sales
Credit Sales	$     42,000	$         53,200	$      36,400	70% of sales
Total sales	$     60,000	$         76,000	$      52,000
	July	August	September	Workings
Estimated Cash Receipts:
Cash sales	$     18,000	$         22,800	$      15,600
Collection from receivables	$     45,800	$         42,000	$      53,200
Total Cash receipts	$     63,800	$        64,800	$      68,800
Less estimated Cash Payments for:
Payments for Direct materials	$     16,960	$         14,240	$      14,560
Payments for Direct labor	$        4,840	$           4,160	$         4,240
Payments for Factory OH	$     21,000	$         17,600	$      18,000
Interest payment	$             58	$                30	$               -	1% of Opening loan balance
commission	$        6,000	$           7,600	$         5,200	10% of sales
office salaries	$        4,800	$           4,800	$         4,800
Rent	$        7,300	$           7,300	$         7,300
Total cash payments	$     60,958	$        55,730	$      54,100
Cash increase or (decrease)	$        2,842	$           9,070	$      14,700
Plus cash balance at beginning of month	$     15,000	$         15,000	$      21,112
Cash balance at end of month	$     17,842	$         24,070	$      35,812
Less: minimum cash balance	$     15,000	$         15,000	$      15,000
Excess or (deficiency) over minimum balance	$        2,842	$           9,070	$      20,812
Repayment of Loan	$      (2,842)	$         (2,958)
Final closing cash balance	$     15,000	$         21,112	$      35,812
Opening loan balance	$        5,800	$           2,958	$               -
Repayment of Loan	$      (2,842)	$         (2,958)	$               -
Additional loan taken	$              -
Closing loan balance	$        2,958	$                 -	$               -

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