Question

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.)

Answer 1

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

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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

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Working notes for the above answer is as under

Working note for A)

Working note for B)