Question

Tilson Corporation has projected sales and production in units for the second quarter of the coming year as follows: April May June Sales 60,000 50,000 70,000 Production 70,000 60,000 60,000 Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 45% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $80,000 per month. The accounts payable balance on March 31 totals $191,000, which will be paid in April. All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% 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 $575,000 ($105,000 from February's sales and $470,000 from March’s sales). Required: a. Prepare a schedule for each month showing budgeted cash disbursements for Tilson Corporation. b. Prepare a schedule for each month showing budgeted cash receipts for Tilson Corporation.

Answer 1

Schedule of cash disbursements
	April	May	June
Sales Units	60,000	50,000	70,000
Production Units	70,000	60,000	60,000
Cash production costs	560,000	480,000	480,000
45% in same month	252,000	216,000	216,000
Balance	191,000	308,000	264,000
Selling and Admin expense	80,000	80,000	80,000
Budgeted cash payments	523,000	604,000	560,000
Cash Receipts Schedule
	April	May	June
Sales	840,000	700,000	980,000
60% in the month of sale	504,000	420,000	588,000
30% in following month	352,500	252,000	210,000
10% in second month	105,000	117,500	84,000
Budgeted collections	961,500	789,500	882,000