Question

The Gammaro Company is preparing its cash payments budget. The following items relate to cash payments the company anticipates making during the second quarter of the upcoming year.

a.

The company pays for 50​% of its direct materials purchases in the month of purchase and the remainder the following month. The​ company's direct material purchases for March through June are anticipated to be as​ follows:

March	April	May	June
$113,000	$137,000	$126,000	$146,000

b.

Direct labor is paid in the month in which it is incurred. Direct labor for each month of the second quarter is budgeted as​ follows:

April	May	June
$46,000	$56,000	$71,000

c.

Manufacturing overhead is estimated to be 130​% of direct labor cost each month. This monthly estimate includes $34,000 of depreciation on the plant and equipment. All manufacturing overhead​ (excluding depreciation) is paid in the month in which it is incurred.

d.

Monthly operating expenses for March through June are projected to be as​ follows:

March	April	May	June
$75,000	$88,000	$84,000	$94,000

Monthly operating expenses are paid in the month after they are incurred. Monthly operating expenses include $12,000 for monthly depreciation on administrative offices and​ equipment, and $3,300 for bad debt expense.

e.

The company plans to pay $7,000 (cash) for a new server in May.

f.

The company must make an estimated tax payment of $13,000 on June 15.

Requirement: Prepare a cash payments budget for​ April, May, and June and for the quarter. ​(If a box is not used in the table leave the box​ empty; do not enter a​ zero.)

The Gammaro Company
Cash Payments Budget
For the Months of April through June
	April	May	June	Quarter
Cash payments for direct materials:
55% of current month purchases
45% of last month's purchases

Cash payments for direct labor

Cash payments for manufacturing overhead

Cash payments for operating expenses

Cash payments for new server

N/A

N/A

Cash payment for taxes

N/A

N/A

Total cash payments

Answer 1

ANSWER

CASH BUDGET
	APR	MAY	JUNE	Total
cash payment for direct material
55% of current month purchase	75,350 [137,000*.55]	69,300 [126,000*.55]	80,300 [146,000*.55]	224,950
45% of last month purchase	50,850	61,650	56,700	169,200
Direct labor	46,000	56,000	71,000	173,000
Manufacturing overhead	25,800 [(46,000*130%)- 34,000]	38,800 [(56,000*130%)-34,000]	58,300 [(71,000*130%)-34,000]	122,900
Operating expense	59,700 [75,000-12,000-3,300]	72,700 [88,000-12,000-3,300]	68,700 [84,000-12,000-3,300]	201,100
New server		7,000		7,000
Taxes			13,000	13,000
Total cash payment	257,700	305,450	348,000	911,150

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