Of all sales 35% are cash sales
Of all sales 60% are collected with the month of sale. Half of the credit sales collected within the month receive a 2% cash discount (if paid in 10 days). 20% credit sales collected following month; remaining credit sales collected the month thereafter. There is virtually no bad debt.
Sales for 2nd quarter (1st 3 months actual sales 2nd 3 months estimated sales):
April 450,000
May 580,000
June 900,000
July 1,140,000
August 1,200,000
September 1,134,000
Company sell all it produces each month. Cost of raw materials 22% of each sales dollar. The co. requires a monthly ending inventory equal to the coming month’s production requirements. Of raw purchases, 50% are paid in the month of purchases. The remaining 50% is paid for in the following month.
Wages $105,000 each month and are paid in the month incurred.
Budgeted monthly operating exp. Total $336,000 (45,000 depreciation, 6,000 expiration of prepaid insurance (annual premium of $72,000 is paid in Jan)
Dividends of $130,000, declared on June 30, will be paid on July 15
Old equipment will be sold for $25,200 on July 4
One July 13, new equip. will be purchased for $173,000
Company maintains a minimum cash balance of $20,000
The cash bal. on July 1 is $27,000
1. Prepare a case budget for July.
2. Give a supporting schedule that details the cash collections from sales.