Zippy Company prepares monthly cash budgets. Relevant data from operating budgets for 2012 are:
January February
Sales $513,000 $513,000
Direct Material Purchases 141,000 111,000
Direct Labor 105,000 110,000
Manufacturing Overhead 63,000 72,000
Selling and Administrative Expenses 77,000 78,000
All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the month of sale, and 20% in the second month following the month of sale. Fifty percent (50%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the month of purchase. All other items above are paid in the month incurred. Depreciation has been omitted from manufacturing overhead and selling and administrative expenses.
Other data:
1.) Credit sales: November 2011, $220,000; December 2011, $275,000
2.) Purchases of direct material : December 2011, $90,000
3.) Other receipts: January - Collection of December 31, 2011 interest receivable $3,000
February - Proceeds from sale of securities $5,000
4.) Other disbursements: February - payment of $28,000 for land.
5.) The company's cash balance on January 1, 2012, is expected to be $60,000.
Instructions:
1.) Prepare schedules for (a) expected collections from customers and (b) expected payments for direct materials purchases.
