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 6.39P

1.

To determine

To prepare: Cash budget for December 2014 and January 2015 as well as supporting schedule for collections of receivable, payments for merchandise, marketing, distribution, and customer service costs.

Given information:

Opening balance of cash as on 01 December is $30,000.

Opening balance of inventory is $111,800.

Opening balance of account payable is $139,000.

Company offer 3% discount if payment is made within 10 days.

50% of bill is collected within discount period.

30% by the end after purchases,

Balance 15%in the following month.

Average selling and purchase price of the product is $170 per unit and $130 per unit.

60% Purchases in a month are paid that month and remaining in the next following month.

Total budgeted marketing, distribution and customer service costs for the year are $670,000 of this $155,000 is considered fixed cost including depreciation of $43,400.

2.

To determine

To explain: The reason for preparation of cash budget along with operating income budget.

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