Clay Corporation has projected sales and production in units for the second quarter of the coming...

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows:

	April	May	June
Sales	55,000	47,000	65,000
Production	62,500	52,500	52,500

Cash-related production costs are budgeted at $5.5 per unit produced. Of these production costs, 30% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $150,000 per month. The accounts payable balance on March 31 totals $240,000, which will be paid in April. All units are sold on account for $14.5 each. Cash collections from sales are budgeted at 65% in the month of sale, 25% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $555,000 ($95,000 from February's sales and $460,000 from March’s sales).

Required:

a. . Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation. (Round your final answer to nearest whole dollar.)

b. Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation. (Round your final answer to nearest whole dollar.)

Solutions

Expert Solution

a. Schedule for budgeted cash disbursements for Clay Corporation:

	April	May	June	Total
Opening balance paid	$240,000			$240,000
April month production	62,500 x $5.5 x 30%= $103,125	62,500 x $5.5 x 70%= $240,625		$343,750
May month production		52,500 x $5.5 x 30%=$86,625	52,500 x $5.5 x 70%= $202,125	$288,750
June month production			52,500 x $5.5 x 30%=$86,625	$86,625
Selling and administrative expenses	$150,000	$150,000	$150,000	$450,000
Total cash disbursements	$493,125	$477,250	$438,750	$1,409,125

b. Schedule for budgeted cash receipts for Clay Corporation:

	April	May	June	Total
February's sales	$95,000			$95,000
March’s sales	$460,000/0.35 x 0.25 = 328,571	$460,000/0.35 x 0.10 = 131,429		$460,000
April’s sales	55,000 x 14.5 x .65 = 518,375	55,000 x 14.5 x .25 = 199,375	55,000 x 14.5 x .10 = 79,750	$797,500
May’s sales		47,000 x 14.5 x .65 = 442,975	47,000 x 14.5 x .25 = 170,375	$613,350
June’s sales			65,000 x 14.5 x .65 = 612,625	$612,625
Total cash receipts	$941,946	$773,779	$862,750	$2,578,475

ekkarill92 answered 11 months ago

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