Question

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

    April   May   June
Sales   50,000   40,000   60,000
Production   60,000   50,000   50,000

Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 35% 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 $179,000, which will be paid in April.

All units are sold on account for $14 each. Cash collections from sales are budgeted at 75% in the month of sale, 15% 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 $488,000 ($98,000 from February's sales and $390,000 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

Solution a:
Budgeted cash disbursement - Tilson Corporation
Particulars	April	May	June	Total
Accounts payable	$179,000.00			$179,000.00
April Production costs	$168,000.00	$312,000.00		$480,000.00
May Production costs		$140,000.00	$260,000.00	$400,000.00
June Production costs			$140,000.00	$140,000.00
Selling and administrative expenses	$80,000.00	$80,000.00	$80,000.00	$240,000.00
Total cash disbursements	$427,000.00	$532,000.00	$480,000.00	$1,439,000.00
Solution b:
Budgeted cash receipts - Tilson Corporation
Particulars	April	May	June	Total
February sales	$98,000.00			$98,000.00
March sales	$234,000.00	$156,000.00		$390,000.00
April Sales	$525,000.00	$105,000.00	$70,000.00	$700,000.00
May Sales		$420,000.00	$84,000.00	$504,000.00
June Sales			$630,000.00	$630,000.00
Total cash receipts	$857,000.00	$681,000.00	$784,000.00	$2,322,000.00