cash budget

Project Description:

bob co prepares monthly cash budgets. the data relevant to its february and march 2012 operating budgets are as follows:

february march
sales $325,000 $450,000
direct materials purchases 120,000 125,000
direct labor 60,000 120,000
manufacturing overhead 60,000 75,000
selling and admin. expenses 77,000 82,000

assume all sales are on account. collections of the sales are expected to be 50% in the month of sale, 30% in the first month following the sale and 20% in the second month following the sale.
thirty percent (30%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. all other items above are paid in the month incurred. depreciation has been excluded from manufacturing overhead and selling and administrative expenses.

other info:
1. credit sales: december, 2011 = $200,000, january, = $280,000
2. purchases of direct materials, january 2012 = $90,000
3. other receipts:
a. february - collection of january interest receivable = $2,500;
b. march - proceeds from sale of securities = $4,500
4. other disbursements: march – purchase of land for $30,000.

the company’s cash balance on february 1, 2012 is expected to be $60,000. the company wants to maintain a minimum cash balance of $45,000 even if it must borrow cash from the bank. ignore interest due on any borrowings for purposes of this problem.


(a) prepare schedules for (1) expected cash collections from customers and (2) expected payments for direct materials purchases.
(b) prepare a cash budget for february and march in columnar form.
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Price Type: Negotiable

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