Cost Accounting (15th Edition)
Cost Accounting (15th Edition)
15th Edition
ISBN: 9780133428704
Author: Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
Question
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Chapter 6, Problem 6.38P

1.

To determine

To prepare: The cash budget for the month July to September and supporting schedule of receivables and payables.

Given information:

Average selling price is $650.

40% of invoices will be paid in the month of invoiced.

45% will be paid in the following month.

15% of invoice will be paid two months after the month of invoice.

Variable manufacturing overhead is $7 per direct manufacturing labor hour.

Variable marketing costs are driven by the number of sales visit.

Fixed manufacturing overhead costs is $7500 per month

Fixed non manufacturing overhead cost is $4500 per month.

2.

To determine

Whether management will be able to pay off $60,000 one year note in the month of October and if not what actions are recommended to management.

3.

To determine

Whether company is able to maintain $14,000 in all three month. If not, what suitable suggestion is for cash management.

4.

To determine

To explain: The reason for which the managers prepare the cash budget in addition to the revenue, expenses and income budget.

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