Beard Company has $14,400 in cash on hand on January 1 and has collected the following budget data: Beard Company January February Sales $535,300 $561,300 Cash receipts from customers $449,800 $496,300 Cash payments for direct materials $173,037 $166,062 Direct labor costs $128,510 $106,262 Manufacturing overhead costs $56,093 $54,372 (including depreciation of $2,200 per month) Assume direct labor costs and manufacturing overhead costs are paid in the month incurred. Additionally, assume Beard Company has cash payments for selling and administrative expenses including salaries of $45,000 per month plus commissions that are 2% of sales, all paid the month of the sale. The company requires a minimum cash balance of $10,000. 1. Prepare a cash budget for January and February. Round to the nearest dollar. 2. Will Beard Company need to borrow cash by the end of February?
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Beard Company has $14,400 in cash on hand on January 1 and has collected the following budget data:
| Beard Company | January | February |
|---|---|---|
| Sales | $535,300 | $561,300 |
| Cash receipts from customers | $449,800 | $496,300 |
| Cash payments for direct materials | $173,037 | $166,062 |
| Direct labor costs | $128,510 | $106,262 |
| $56,093 | $54,372 | |
| (including depreciation of $2,200 per month) |
Assume direct labor costs and manufacturing overhead costs are paid in the month incurred. Additionally, assume Beard Company has cash payments for selling and administrative expenses including salaries of $45,000 per month plus commissions that are 2% of sales, all paid the month of the sale. The company requires a minimum cash balance of $10,000.
1. Prepare a
2. Will Beard Company need to borrow cash by the end of February?
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