Danner Company expects to have a cash balance of $51,300 on January 1, 2020. Relevant monthly budget data for the first 2 months of 2020 are as follows. Collections from customers: January $96,900, February $171,000. Payments for direct materials: January $57,000, February $85,500. Direct labor: January $34,200, February $51,300. Wages are paid in the month they are incurred. Manufacturing overhead: January $23,940, February $28,500. These costs include depreciation of $1,710 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $17,100, February $22,800. These costs are exclusive of depreciation. They are paid as incurred. Sales of marketable securities in January are expected to realize $13,680 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $28,500. The company wants to maintain a minimum monthly cash balance of $22,800. Prepare a cash budget for January and February.

Danner Company

Danner Company

Cash Budget

                                               January       February

Beginning Balance                 $51,300        $31,350

Collections from customers:  96,900         171,000

Sale of marketable securities 13,680

Total cash receipts              $161,880     $202,350

Payments:

Direct materials:                   $57,000       $85,500

Direct labor:                            34,200          51,300

Manufacturing overhead:      22,230         26,790

Selling & Administrative:         17,100          22,800

Total payments                  $130,530      $186,390

Cash Balance                       $31,350        $15,960

Minimum cash balance         22,800         22,800

Excess cash (deficit)             $8,550         ($6,840)

Explanation:

a) Data and Calculations:

Expected Cash balance on January 1, 2020 = $51,300

Collections from customers:

January   $96,900

February $171,000

Payments for direct materials:

January $57,000

February $85,500

Direct labor:

January $34,200

February $51,300

Manufacturing overhead:

January $23,940 - depreciation of $1,710 Net $22,230

February $28,500 - depreciation of $1,710 Net $26,790

Selling and administrative expenses:

January $17,100

February $22,800

Sales of Marketable securities in January = $13,680

Line of credit = $28,500

Expected monthly minimum cash balance = $22,800

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