Nunez Company expects to have a cash balance of $44,000 on January 1, 2020. Relevant monthly budget
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Question:
Nunez Company expects to have a cash balance of $44,000 on January 1, 2020. Relevant monthly budget data for the first two months of 2020 are as follows:
1. | Collections from customers: January $99,000; February $158,000 | ||
2. | Payments to suppliers: January $60,000; February $81,000 | ||
3. | Direct labour: January $30,000; February $44,000. Wages are paid in the month they are incurred. | ||
4. | Manufacturing overhead: January $26,000; February $33,000. These costs include depreciation of $1,000 per month. All other overhead costs are paid as incurred. | ||
5. | Selling and administrative expenses: January $14,000; February $21,000. These costs are exclusive of depreciation. They are paid as incurred. | ||
6. | Sales of marketable securities in January are expected to realize $9,000 in cash. |
Nunez Company has a line of credit at a local bank. It can borrow up to $24,000. The company wants to keep a minimum monthly cash balance of $23,000.
Prepare a cash budget for January and February.
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