Shown below are the totals from period budgets of Miller Corporation for the current year:

Revenue budget
$100,000
Materials usage from production budget
15,000
Labor cost budget
20,000
Manufacturing overhead budget
20,000
General and administrative budget 30,000
Capital expenditure budget
20,000
Work in Progress Inventories:
Beginning of Year
10,000
End of Year
5,000
Finished Goods Inventory:
Beginning of Year
15,000
End of Year
10,000
Tax Rate
40%
Prepare a forecasted Income Statement for the current year:
Cline Company has the following collection pattern for its accounts receivable:
40 percent in the month of sale
50 percent in the month following the sale
8 percent in the second month following the sale
2 percent uncollectible
The company has recent credit sales as follows:
April:
May:
June:

$200,000
420,000
350,000

How much should the company expect to collect on its receivables in June?
Oakwood Music, Inc.
Oakwood Music, Inc. sells Baldwin pianos. The following information regarding operating
costs has been extracted from budgets of Oakwood Music for December of this year and the
first few months of next year:
Payroll
Insurance
Rent
Depreciation
Taxes

Dec.
$12,000
4,000
6,000
2,000
1,200

Jan.
$13,000
4,000
6,000
2,000
1,400

Feb.
$22,000
4,000
6,000
2,000
2,300

Mar.
$16,000
4,000
6,000
2,000
2,000

In addition to the above operating costs, enough pianos are purchased each month to
maintain the inventory at 40 percent of the projected next month's sales. The firm is
expected to be in compliance with this policy on December 1. Budgeted sales are:
Budgeted sales in units:
A.

Dec.
40

Jan.
45

Feb.
60

Mar.
50

Apr.
40

The average cost of a piano is $500. Merchandise is paid for in the month following
its purchase. All other expenses are paid in the month in which they are incurred. On
average, a piano sells for $1,500. Of each sale, 40 percent of the sales price is
collected in the month of sale. The balance is collected in the month following the
sale. Prepare a cash budget for the first three months of next year. The beginning
cash balance on January 1 is budgeted to be $50,000.

B. Refer to Oakwood Music, Inc. The average cost of a piano is $500. Merchandise is
paid for in the month following its purchase. All other expenses are paid in the month
in which they are incurred. Prepare a budget of the cash disbursements for Oakwood
Music, Inc. for the first three months of next year.

Wentworth Company
Wentworth Company manufactures three products (A, B, and C) from three raw materials (X,
Y, and Z). The following table indicates the number of pounds of each material that is
required to manufacture each type of product:
Product
A
B
C

Material X
2
2
3

Material Y
3
1
2

Material Z
2
2
2

The company has a policy of maintaining an inventory of finished goods on all three
products equal to 25 percent of the next month's budgeted sales. Listed below is the sales
budget for the first quarter of 2001:
Month
Jan.
Feb.
Mar.
A.

Product A
10,000
9,000
11,000

Product B
11,000
12,000
10,000

Product C
12,000
8,000
10,000

Assuming that the company meets its required inventory policy, prepare a production
budget for the first 2 months of 2001 for each of the three products.

B. Unit costs of materials X, Y, and Z are respectively $4, $3, and $5. The Wentworth
Company has a policy of maintaining its raw material inventories at 50 percent of the
next month's production needs. Assuming that this policy is satisfied, prepare a material
purchases budget for all three materials in both pounds and dollars for January.
The following are forecasts of sales and purchases for China Grove Company:
April
May
June

Sales
$80,000
90,000
85,000

Purchases
$30,000
40,000
30,000

All sales are on credit. Records show that 70 percent of the customers pay the month of the
sale, 20 percent pay the month after the sale, and the remaining 10 percent pay the second
month after the sale. Purchases are all paid the following month at a 2 percent discount.
Cash disbursements for operating expenses in June were $5,000.
Required: Prepare a schedule of cash receipts and disbursements for June.
Allen Builders in the building construction business. In Year 2, it is expected that 40 percent
of a month's sales will be collected in cash, with the balance being collected the following
month. Of the purchases, 50 percent are paid the following month, 30 percent are paid in
two months, and the remaining 20 percent are paid during the month of purchase. The sales
force receives $2,000 a month base pay plus a 2 percent commission. Labor expenses are
expected to be $4,000 a month. Other operating expenses are expected to run about $2,000
a month, including $500 for depreciation. The ending cash balance for Year 1 was $4,500.
Sales
Year 1-Actual
November
December
Year 2-Budgeted
January
February
March

Purchases

$80,000
90,000

$70,000
80,000

70,000
90,000
30,000

70,000
60,000
50,000

Required:
a. Prepare a cash budget and determine the projected ending cash balances
for the first three months of Year 2.
b. Determine the months that the company would either borrow or invest
cash.