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Compute a budgeted cash balance

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Sherman Company has a cash balance on January 1 of $123,219. Given the following data, compute Sherman's budgeted cash balance on March 31. Round all amounts to the nearest dollar.

Past and budgeted future activity, in $000:

Sales Operating expense

November 1,625 525
December 1,790 460
January 1,428 448
February 1,295 395
March 1,306 421
April 1,422 404

Sherman has a gross profit of 40%, and has a policy of maintaining an inventory of 150% of expected next-month sales. Operating expenses are paid 75% in the current month, and 25% in the following month. Purchases of merchandise are paid for 50% in the current month, and 50% in the following month. All sales are on credit. Normal pattern of collections is: 40% in month of sale, 44% in following month, 11% in next following month, 5% uncollectible.

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Please see the attached Excel 97-2003 spreadsheet for format and formulas.

Sherman Company has a cash balance on January 1 of $123,219.Ã? Ã? Given the following data, compute Sherman's budgeted cash balance on March 31.Ã? Ã? Round all amounts to the nearest dollar.

Past and budgeted future activity, in $000:
Operating
Sales expense
November $1,625 $525
December $1,790 $460
January $1,428 $448
February $1,295 $395
March $1,306 $421
April $1,422 $404

Sherman has a gross profit of 40%, and has a policy of maintaining an inventory of 150% of expected next-month sales.Ã? Ã? Operating expenses are paid 75% in the
current month, and 25% in the following month.Ã? Ã? Purchases of merchandise are paid for 50% in the ...

Solution Summary

This solution illustrates how to compute a budgeted cash balance.

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'MBA Level Accounting Questions

1. Answer both independent parts.

a. Dagwood Company manufactures three products (A,B,C). During the coming period, Dagwood expects to have 7,500 direct labor hours and 5,500 machine hours available. Given the following data, determine how much of each product Dagwood should produce (assume that Dagwood maintains no inventories of finished product). Direct labor cost is $28/hour.

A B C

Direct materials cost/unit $55 $86 $102
Variable overhead/unit $23 $40 $39
Fixed overhead/unit $52 $65 $74
Selling price/unit $240 $400 $460
Labor hours/unit 1.5 3.5 3
Machine hours/unit 1 2.5 3

Forecast demand in units 1,400 1,100 700

b. Sherman Company has a cash balance on January 1 of $123,484. Given the following data, compute Sherman's budgeted cash balance on March 31. Round all amounts to the nearest dollar.
Past and budgeted future activity, in $000:
Sales Operating expense

November 1,526 425
December 1,491 400
January 1,388 408
February 1,295 395
March 1,456 416
April 1,422 399

Sherman has a gross profit of 40%, and has a policy of maintaining an inventory of 150% of expected next-month sales. Operating expenses are paid 80% in the current month, and 20% in the following month. Purchases of merchandise are paid for 50% in the current month, and 50% in the following month. All sales are on credit. Normal pattern of collections is: 40% in month of sale, 46% in following month, 10% in next following month, 4% uncollectible.

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