Myrna Manufacturing is located in France and has projected sales in units for its first four months of operations as follows:
January ..... 25,000
February .... 30,000
March ..... 32,000
April ...... 35,000
The product sells for €18 per unit. Twenty-five percent of the customers are expected to pay in the month of sale and take a 3% discount; 70% are expected to pay in the month following sale. The remaining 5% will never pay.
It takes 2 pounds of materials to produce a unit of product. The materials cost €0.75 per pound.
In January there are no raw materials in beginning inventories, but managers want to end each month with enough materials for 20% of the next month’s production. The firm pays for 60% of its materials purchases in the month of purchase and 40% in the following month. It takes one-half hour of labor to produce each unit. Labor is paid €15 per hour and is paid in the same month as worked. Overhead is estimated to be €2 per unit plus €25,000 per month (including depreciation of €12,000). Overhead costs are paid as incurred.
Myrna will begin January with no finished goods or work-in-process inventory. The managers wish to end each month with 25% of the following month’s sales in finished goods inventory and no work in process.

Prepare a cash receipts and disbursements budget for February.

  • CreatedJanuary 26, 2015
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