Question

Nadia Company expects to have a cash balance of $45,300 on January 1, 2020. Nadia has budgeted the following for the first two months of the year 2020:

1. Collections from customers: January $89,300; February $110,500.

2. Payments to suppliers: January $39,700; February $50,000.

3. Direct labour: January $29,700; February $35,000. Wages are paid in the month they are incurred.

4. Manufacturing overhead: January $25,200; February $30,100. Overhead costs are paid as incurred.

5. Selling and administrative expenses: January $16,100; February $21,900. These costs do not include depreciation and they are paid as incurred.

6. Sales of investments in January are expected to realize $10,100 in cash.

Nadia Company wants to keep a minimum monthly cash balance of $20,000.

Prepare a cash budget for January and February.

Answer 1