Question

In: Accounting

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)

Prepare a schedule for each month showing budgeted cash disbursements for the Clay Company.

April

May

June

Production units

62,500

52,500

52,500

Cash required per unit

× $5.5

× $5.5

× $5.5

Production costs

$343,750

$288,750

$288,750

Cash disbursements:

April

May

June

Production this month (30%)

$103,125

$86,625

$86,625

Production prior month (70%)

240,000

240,625

202,125

Selling and administrative

150,000

150,000

150,000

Total disbursements

$493,125

$477,250

$438,750

_______________________________________________

b)

April

May

June

Sales units

55,000

47,000

65,000

Sales price

× $14.5

× $14.5

× $14.5

Total sales

$797,500

$681,500

$942,500

April

May

June

Cash receipts:

February sales

95000

March sales

328,571

131,429

April sales

518375

199,375

79750

May sales

442975

170,375

June sales

612625

Total receipts

$941,946

$773,779

$862,750

__________________________________

Working notes for the above answer is as under

Working note for A)

Working note for B)


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