Question

6. The O’Brien Vineyards makes and sells an awarding Pinot Noir. Each bottle of Pinot Noir sells for $24 and has a unit variable cost of $14.
Here is what you will need to put together my Cash Budget
 Maintains a 12% (1% per month) open line of credit for $75,000
 Maintains a minimum cash balance of $20,000
 Borrows on the first day of the month and repays loans last day of the next month (for example, if you were to borrow for July, which is really to meet August 1 beginning balance, you would repay end of Sept. You have use of the funds for 2 full months).
 Pays a cash dividend of $10,000 in July
 Purchased $38,000 of oak barrels in August and $48,400 of oak barrels in September both purchases of equipment paid for in cash.
 Cash balance at July 1 is $22,500
I have summarized the following budget information for you
July
August
September
Cash Collections
70,000
88,000
129,650
Cash Disbursements:
Materials
18,000
19,500
17,700
Direct Labor
8,000
9,200
8,500
MOH
24,000
27,000
25,000
Selling and Admin
18,000
19,300
18,850
Prepare the Cash Budget
July
August
September
Beginning Cash
add:
Cash Collections
Total Cash Available
less:
Cash Disbursements
Materials
Direct Labor
MOH
Selling and Admin
Equipment Purchase
Dividend
Total Disbursements
Excess (Deficiency)
Financing:
Borrowing
Repayments
Interest
Total Financing
Ending Cash Balance

Answer 1

Solution:

Cash Budget - O' Brien Vineyards
Particulars	July	August	September
Opening Cash balance	$22,500.00	$20,000.00	$20,000.00
Add: Collection from customers	$70,000.00	$88,000.00	$129,650.00
Total Cash Available	$92,500.00	$108,000.00	$149,650.00
Less - Cash Disbursement:
Materials	$18,000.00	$19,500.00	$17,700.00
Direct labor	$8,000.00	$9,200.00	$8,500.00
MOH	$24,000.00	$27,000.00	$25,000.00
Selling and admin	$18,000.00	$19,300.00	$18,850.00
Equipment Purchase	$0.00	$38,000.00	$48,400.00
Dividend	$10,000.00	$0.00	$0.00
Total Cash disbursement	$78,000.00	$113,000.00	$118,450.00
Excess (deficiency) of cash available over disbursements	$14,500.00	-$5,000.00	$31,200.00
Financing:
Borrowings	$5,500.00	$25,000.00	$0.00
Repayments	$0.00	$0.00	-$5,500.00
Interest	$0.00	$0.00	-$110.00
Total Financing	$5,500.00	$25,000.00	-$5,610.00
Ending cash balance	$20,000.00	$20,000.00	$25,590.00