Question

Built-Tight is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for product costs for the quarter follow.

July August September
Budgeted sales $58,500 $74,500 $53,500
Budgeted cash payments for Direct materials 16,060 13,340 13,660
Direct labor 3,940 3,260 3,340
Factory overhead 20,100 16,700 17,100

Sales are 25% cash and 75% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $44,900 in accounts receivable; and a $4,900 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,900 per month), and rent ($6,400 per month).

Required:
Prepare a cash budget for each of the months of July, August, and September.

Answer 1

Cash budgets are prepared to analyze the company real cash position. It only includes transaction in which real exchange of cash takes place.

Step-by-step explanation:

Particulars July ; August ; September

Beginning Cash Balance 15,000 ; 15,000 ; 21,960

Cash receipts from customers 37,500 ; 51,400 ; 69,251

Total cash available 52,500 ; 66,400 ; 91,211

Cash Payments :

Direct Material 16,060 ; 13,340 ; 13,660

Direct labor 3,940 ; 3,260 ; 3,340

Overheads 20,100 ; 16,700 ; 17,100

Sales commission 5,850 ; 7,450 ; 5,350

Office Salaries 3,900 ; 3,900 ; 3,900

Rent 6,400 ; 6,400 ; 6,400

Interest on Bank loan 76 ; 0 , 0

Total Cash Payments 56,326 ; 51,050 ; 49,750

Ending Balance -3,826 ; 15,350 ; 41,461