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Sunday Starr prepares monthly cash budgets. Relevant data from Sunday Starr's

operating budgets for 2011 are:
January February
Sales $525,000 $600,000
Direct materials purchases 142,500 165,000
Direct Labour 120,000 142,500
Manufacturing Overhead 90,000 12,500
Selling and administrative expenses 112,500 127,500

Notes:

1. All sales are on account. Credit sales for November 2010 are $300,000; and for December 2010, were $450,000.

2. Collections from accounts receivable are expected to be 60% in the month of sale, and 40% in the second month following sale.

3. Direct materials purchased in December 2010 amounted to $90,000. 40% of the direct materials purchased are paid for in the month of purchase. The balance is paid in the month following purchase.

4. Assume that all other expenses are paid in the month incurred.

5. February 2011, received proceeds from the sale of investments of $5,000.

6. February 2011, paid $20,000 cash for land.

7. Sunday Starr management policy is to maintain a minimum cash balance of $50,000. The cash balance on December 31st 2010 is expected to be $60,000.

8. Depreciation has not been included in the data provided for manufacturing overhead and selling and administrative expenses.

Required:

Prepare Sunday Starr's cash budget for January and February in columnar format.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M944549

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