Lily Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as f 2 are as follows. January February Sales $302.400 $336,000 Direct materials purchases 100,900 105.000 Direct labor 75.600 Manufacturing overhead 58.900 Selling and administrative expenses 66,360 1. 2. 3. 84.000 4. 63,000 All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $840 of depreciation per month. Other data: 71,400 Credit sales: November 2021, $210,000: December 2021, $268,800. Purchases of direct materials: December 2021, 584,000. Other receipts: January-Collection of December 31, 2021, notes receivable $12,600; February-Proceeds from sale of securities $5,040. Other disbursements: February-Payment of $5,040 cash dividend. The company's cash balance on January 1, 2022, is expected to be $50,400. The company wants to maintain a minimum cash balance of $42,000.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 4P

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Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Prepare a cash budget for January and February in columnar form.

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Lily Company prepares monthly cash budgets. Relevant data from operating budgets for 2022 are as follows.
Sales
Direct materials purchases
Direct labor
Manufacturing overhead
Selling and administrative expenses
1.
2.
3.
January
$302,400
100,800
75,600
58,800
66,360
4.
February
$336,000
105,000
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in
the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and
the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling
and administrative expenses that include $840 of depreciation per month.
Other data:
84,000
63,000
71,400
Credit sales: November 2021, $210,000; December 2021, $268,800.
Purchases of direct materials: December 2021, $84,000.
Other receipts: January-Collection of December 31, 2021, notes receivable $12,600;
February-Proceeds from sale of securities $5,040.
Other disbursements: February-Payment of $5,040 cash dividend.
The company's cash balance on January 1, 2022, is expected to be $50,400. The company wants to maintain a minimum cash balance
of $42,000.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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