Question

Grouper Company prepares monthly cash budgets. Relevant data from operating budgets for 2017 are as follows:

		January		February
Sales		$381,600		$424,000
Direct materials purchases		127,200		132,500
Direct labor		95,400		106,000
Manufacturing overhead		74,200		79,500
Selling and administrative expenses		83,740		90,100

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 $1,060 of depreciation per month.

Other data:

1.		Credit sales: November 2016, $265,000; December 2016, $339,200.
2.		Purchases of direct materials: December 2016, $106,000.
3.		Other receipts: January—Collection of December 31, 2016, notes receivable $15,900;
		February—Proceeds from sale of securities $6,360.
4.		Other disbursements: February—Payment of $6,360 cash dividend.

The company’s cash balance on January 1, 2017, is expected to be $63,600. The company wants to maintain a minimum cash balance of $53,000.

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

Expected Collections from Customers
		January		February
November		$		$
December
January
February
Total collections		$		$

Expected Payments for Direct Materials
		January		February
December		$		$
January
February
Total payments		$		$

Answer 1

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

Expected Collections from Customers
		January		February
November		$53000		$
December		101760		67840
January		190800		114480
February				212000
Total collections		$345560		$394320

Expected Payments for Direct Materials
		January		February
December		$42400		$
January		76320		50880
February				79500
Total payments		$118720		$130380