Question

: For the second quarter of the following year Cloaks Company has projected sales and production in units as follows: Jan Feb Mar Sales 56,000 58,000 63,000 Production 60,000 55,000 56,000 Cash-related production costs are budgeted at $8 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the next month. $170,000 per month will account for Selling and administrative expenses. On January 31 the accounts payable balance totals $210,000, which will be paid in February. All units are sold on account for $12 each. Cash collections from sales are budgeted at 60% in the month of sale, 20% in the month following the month of sale, and the remaining 20% in the second month following the month of sale.

1. Prepare a schedule for each month showing budgeted cash disbursements for Cloaks Company. (8 marks

) 2. Prepare a schedule for each month showing budgeted cash receipts for Cloaks Company.

Answer 1

1. Budgeted Cash Disbursements:

Particulars	Jan	Feb	Mar
Production Units	60,000	55,000	56,000
Production Costs @ 8 per unit	480,000	440,000	448,000
Cash Payments @ 40%	32,000	176,000	179,200
Balance @ 60%	-	288,000	264,000
Selling & Admin Expenses	170,000	170,000	170,000
Accounts Payable	-	210,000	-
Total Cash Disbursements	202,000	844,000	613,200

2. Budgeted Cash Receipts:

Particulars	Jan	Feb	Mar
Sales Units	56,000	58,000	63,000
Sales Price @ $12 each	672,000	696,000	756,000
Cash Collections @ 60%	403,200	417,600	453,600
Next month @ 20%	-	134,400	139,200
Balance @ 20%	-	-	134,400
Total Cash Receipts	403,200	552,000	727,200