Danner Company expects to have a cash balance of $58,005 on January 1, 2017. Relevant monthly budget data for the first 2 months of 2017 are as follows.
Collections from customers: January $109,565, February $193,350. Payments for direct materials: January $64,450, February $96,675. Direct labor: January $38,670, February $58,005. Wages are paid in the month they are incurred. Manufacturing overhead: January $27,069, February $32,225. These costs include depreciation of $1,933 per month. All other overhead costs are paid as incurred. Selling and administrative expenses: January $19,335, February $25,780. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $15,468 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $32,225. The company wants to maintain a minimum monthly cash balance of $25,780.
Prepare a cash budget for January and February.