BITS Pilani Schedule of Cash Disbursement for Direct Material Purchases Questions


To Industries prepares monthly cash budgets.The following budget information is available for April and May 2020:






Direct material purchases



Direct labor



Manufacturing overhead



Selling and administrative expenses



All sales are credit sales.The company expects to collect 65% from customers in the month of the sale and the remaining 35% in first month following the sale.The company purchases direct materials on account.The company pays for 70% of the purchases in the month of the purchases and the remaining 30% in the first month following the purchase.Direct labor, manufacturing overhead, and selling and administrative expenses are paid in cash in the month incurred.

Additional information:

March 2020 credit sales were $600,000
March 2020 purchases of direct materials were $200,000
The company’s cash balance on April 1, 2020 is expected to be $90,000
The company wants to maintain a minimum cash balance of $80,000 and has a line of credit in the amount of 1,000,000, with an annual interest rate of 6%, available to borrow if the budgeted cash balance falls below that level.Any amounts borrowed on the line of credit at the end of a month require a cash interest payment in the subsequent month.If the ending cash balance in a month exceeds the minimum balance, the excess amount is used to repay any amounts borrowed on the line of credit.


Prepare a schedule of cash collections from credit sales for April and May 2020.
Prepare a schedule of cash disbursements for direct material purchases for April and May 2020.
Prepare a cash budget for April and May 2020 in columnar format.

Tags: credit sales Cash interest payment budgeted cash balance
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