In: Accounting
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.)
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)