Dalhousie - Management Accounting Cash Budget Worksheet

Chapter 7

•             Assignments must be completed in Word or Excel only.  Other formats, including handwritten assignments will not be accepted.

•             Please ensure that your submissions are not LOCKED and are submitted through Moodle

•             Solutions will be posted on Moodle after the due date.

Part A

Epic Foods produces specialty soup sold in mason jars.  The projected sales in dollars and jars for each quarter of the upcoming year are as follows:

                Total sales revenue         Number of jars sold

1st quarter (2021)            $182,000              150,000

2nd quarter(2021)           $210,000              180,500

3rd quarter(2021)            $251,000              213,500

4th quarter(2021)            $195,000              164,500

Epic anticipates selling 223,000 jars with total sales revenue of $265,000 in the first quarter of the year (2022) following the year given in the table above.  Epic has a policy that the ending inventory of jars must be 30% of the following quarter’s sales.  Prepare a production budget for the year that shows the number of jars to be produced each quarter and the year in total.

PART B

Gable industries manufactures a popular interactive stuffed animal for childrenthat requires two computer chips inside each toy.  Gable pays $3 for each computer chip.  To help guard against stockouts of the computer chip Gable has a policy that states that the ending inventory of computer chips should be at least 20% of the following month’s production needs.  The production schedule for the first four months of the year is as follows:

Month  Stuffed animals to be produced

January                5,700

February              4,600

March   4,300

April       4,900

Required: Prepare a direct materials budget for the first quarter that shows both the number of computer chips needed and the dollar amount of the purchases in the budget

PART C

Roan’s manufacturing is preparing its cash budget for the first two months of the upcoming year.  The following information concerns the company’s upcoming cash receipts and disbursements.

•             Sales are 65% cash and 35% credit. Credit sales are collected 30% in the month of sale and the remainder in the month after the sale.  Actual sales in December were $51,000. 

 

•             January sales are budgeted to be $60,000; February sales are budgeted to be $69,000

•             Actual purchases of direct materials in December were $25,500.  Roan’s purchases of direct materials in January are budgeted to be $23,500 and $28,000 in February.  All purchases are paid 30% in the month of purchase and 70% the following month.

•             Salaries and sales commissions are also paid 50% in the month earned (when the sales are made) and 50% the following month. Actual salaries in December were $8,000.  Budgeted salaries for January are $9,000 and February budgeted salaries are $10,500.  Sales commissions each month are 8% of that month’s sales.

•             Rent expense is $3,300 per month

•             Depreciation is $2,800 per month

•             The cash balance at the end of the prior year was $18,000

•             The company is required to maintain a cash balance of $10,000. If necessary, it can borrow in increments of $1,000 at 0% interest.  So far, the company has not had to borrow.

Required:

1.            Prepare a schedule of

a)            cash collections

b)            budgeted cash payments for purchases of direct materials

c)            budgeted cash payments for operating expenses

2.            Cash budget for January and February