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Problem 20-2A Manufacturing: Cash budget LO P2

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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	$	64,000		$	80,000		$	48,000
Budgeted cash payments for
Direct materials		16,160			13,440			13,760
Direct labor		4,040			3,360			3,440
Factory overhead		20,200			16,800			17,200

Sales are 20% cash and 80% 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; $45,000 in accounts receivable; and a $5,000 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 ($4,000 per month), and rent ($6,500 per month).

rev: 03_17_2020_QC_CS-204679

Problem 20-2A Part 2

(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.)

	BUILT-TIGHT Cash Budget For July, August, and September July August September Beginning cash balance Total cash available Cash payments for: Total cash payments Preliminary cash balance Ending cash balance Loan balance July August September Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month

Answer 1

1. For the month of July

• Begining cash balance is 15,000
• cash from sales ; cash sales is only 20% of total sales; sales in july is 64,000, 20% of 64,000= 12,800
• Cash recipts from accounts recievable, Accounts recievable is 80% of previous mont sales, 80% of sales is credit and cash will collect in following month, june 30 accounts recievable 45,000 is the 80% previous month sales; so, cash recipts from accounts recievable= 45,000
• Cash pyments for direct materials 16,160
• Cash payments for direct labour 4,040
• cash payments forr factory OH 20,200
• operating expenses; sales commission 10% of sales= 0.1 * 64,000= 6400
• office salary 4000
• rent 6500
• Begining loan balance is 5,000 so, interest per month is 1%; 1% of 5,000= 50
• Total cash availabe =Begining cash balance + cash sales + Cash recieved from previous month sales=15000 + 12,800 + 45,000= 72,800
• Total payments=Cash pyments for direct materials+Cash payments for direct labour+cash payments forr factory OH+sales commission+office salary+rent+interest=16,160 + 4,040+ 20,200+6400+4000+ 6500+50=57,350
• preliminary cash balance= 72,800- 57350=15,450; minimum balance is 15,000
• excess balance = preliminary balance- 15,000= 15,450- 15,000=450; 450 will use to repay loan
• balance of loan at the end of month 5000-450=4550

For the month of august

• Begining cash balance is 15,000
• cash from sales ; cash sales is only 20% of total sales 80,000=80,000* 0.2= 16,000
• Cash recipts from accounts recievable, 80% previous month sales 64,000= 0.8* 64,000=51,200
• Cash pyments for direct materials 13,440
• Cash payments for direct labour 3,360
• cash payments forr factory OH 16,800
• operating expenses; sales commission 10% of sales 80,000 = 0.1 * 80,000= 8,000
• office salary 4000
• rent 6500
• Begining loan balance is 4550, interest 1%= 4550 * 0.01=45.5
• Total cash availabe =Begining cash balance + cash sales + Cash recieved from previous month sales=15,000 + 16,000 + 51200= 82,200
• Total payments=Cash pyments for direct materials+Cash payments for direct labour+cash payments forr factory OH+sales commission+office salary+rent+interest= 13,440+ 3,360+16,800+8,000+4000+ 6500+ 45.5= 52,145.5
• preliminary cash balance=82,200-52,145.5=30,054.5
• Excesss cash ;preliminary balance- minimum balance= 30,054.5- 15,000= 15,054.5
• loan balance 4550 can repay with excess money ; 4550 repayed
• ending cash balance= 30,054.5- 4550= 25,504.5

For september

• Begining cash balance is 25,504.5
• cash from sales ; cash sales is only 20% of total sales 48,000= 9600
• Cash recipts from accounts recievable, 80% previous month sales 80,000= 64,000
• Cash pyments for direct materials 13,760
• Cash payments for direct labour 3440
• cash payments forr factory OH 17200
• operating expenses; sales commission 10% of sales 48,000= 4800
• office salary 4000
• rent 6500
• Total cash availabe =Begining cash balance + cash sales + Cash recieved from previous month sales=25,504.5 + 9600 + 64,000=99,104.5
• Total payments=Cash pyments for direct materials+Cash payments for direct labour+cash payments forr factory OH+sales commission+office salary+rent+interest= 13,760+ 3440+17200+ 4,800+4000+6500+00= 49,700
• preliminary cash balance= 99,104.5-49700= 49,404.5

there is no loan balance at the begining so thre is no interest expense month end cash balance= 49,404.5

	July	August	September
Begining cash balance	15,000	15,000	25,504.5
cash sles	12,800	16,000	9600
Cash from accounts recievable	45,000	51,200	64,000
Total cash available	72,800	82,200	99,104.5
Cash payments for
Direct materials	16,160	13,440	13,760
Direct labour	4040	3360	3440
factory OH	20,200	16,800	17,200
sales commission	6,400	8,000	4800
office salary	4000	4,000	4000
rent	6,500	6500	6,500
Interest	50	45.5	0000
Total payments	57,350	52,145.5	49,700
Preliminary cash balance	15,450	30,054.5	49,404.5
Loan repayment	450	4,550	00000
Ending cash balance	15,000	25,504.5	49,404.5

	july	august	september
Begining balance of loan	5,000	4,550	0000
Additional loan or( repayment)	(450)	(4550)	0000
ending balance	4550	0000	0000