Sales $350,000 $400,000
Direct materials purchases 110,000 130,000
Direct labor 90,000 100,000
Manufacturing overhead 70,000 75,000
Selling and administrative expenses 79,000 86,000
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. 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 $1,000 of depreciation per month.
1. Credit sales: November 2010, $260,000; December 2010, $320,000
2. Purchases of direct materials: December 2010, $100,000
3. Other receipts: January - Collection of December 31, 2010, notes receivable $15,000; February - Proceeds
from sale of securitites $6,000
4. Other disbursements: February - withdrawal of $5,000 cash for personal use of owner; Percy Smunch
The company's cash blance of January 1, 2011, is expected to be $60,000. The company wants to maintain
a minimum cash balance of $50,000
a) prepare schedules for (1) expected collections from customers and (2) expected payments for direct
b) prepare a cash budget for January and February in columnar form
The solution computes monthly cash budgets, expected collections & payments for Holmes Company.