Question

Danner Company expects to have a cash balance of $46,800 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows.

Collections from customers: January $88,400, February $156,000.

Payments for direct materials: January $52,000, February $78,000.

Direct labor: January $31,200, February $46,800. Wages are paid in the month they are incurred.

Manufacturing overhead: January $21,840, February $26,000. These costs include depreciation of $1,560 per month. All other overhead costs are paid as incurred.

Selling and administrative expenses: January $15,600, February $20,800. These costs are exclusive of depreciation. They are paid as incurred.

Sales of marketable securities in January are expected to realize $12,480 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $26,000. The company wants to maintain a minimum monthly cash balance of $20,800.

Prepare a cash budget for January and February.

Answer 1

cash budget

Particulars	Jan	Feb
Section 1:Cash Receipts
Beginning Cash Balance	46,800	28,600
Add: Cash collections	88,400	156,000
Cash Collection from sales of marketable securities	12,480	0
Total Cash Available	147,680	184,600
Section 2 Cash Payments
Direct Materials	52,000	78,000
Direct Labours	31,200	46,800
Manufacturing Overhead(Exclude depreciation)	20,280	24,440
Selling and administrative expenses	15,600	20,800
Total Cash Payments	119,080	170,040
Cash Excess (deficiency)	28,600	14,560
Add: Borrowing from Bank	-	6,240
Ending Cash Balance	28,600	20,800