Question

Deitz Corporation is projecting a cash balance of $33,300 in its December 31, 2019, balance sheet. Deitz’s schedule of expected collections from customers for the first quarter of 2020 shows total collections of $205,350. The schedule of expected payments for direct materials for the first quarter of 2020 shows total payments of $47,730. Other information gathered for the first quarter of 2020 is sale of equipment $3,330; direct labor $77,700, manufacturing overhead $38,850, selling and administrative expenses $49,950; and purchase of securities $15,540. Deitz wants to maintain a balance of at least $27,750 cash at the end of each quarter. Prepare a cash budget for the first quarter.

Answer 1

Deitz Corporation

Cash Budget

For the Quarter ended March 31, 2020:

Beginning balance $33,300

Cash Collections From Customers 205,350

Sale of Equipment 3,330

Total available cash $241,980

Cash Payments:

Direct materials $47,730

Direct labor 77,700

Manufacturing overhead 38,850

Selling & Administrative 49,950

Purchase of Securities 15,540 $(229,770)

Ending Balance $12,210

Minimum Balance 27,750

Shortfall $15,540

Step-by-step explanation:

Deitz Corporation uses this Cash Budget which it has prepared to understand its financial needs for the next quarter. For example, with the minimum balance of $27,750 most likely based on past experience the corporation will start making arrangements for some outside funds to the tune of $15,540 or more to meet its cash needs for the first quarter.