Clay Company Has Projected Sales and Production in Units for the Second

question 38

Essay

Clay Company has projected sales and production in units for the second quarter of the coming year as follows:
$\begin{array}{|l|r|r|r|}\hline & \text { Apri } & \text { May } & \text { June } \\\hline \text { Sales } & 50,000 & 40,000 & 60,000 \\\hline \text { Production } & 60,000 & 50,000 & 50,000 \\\hline\end{array}$ Cash-related production costs are budgeted at $5 per unit produced.Of these production costs,40% are paid in the month in which they are incurred and the balance in the following month.Selling and administrative expenses will amount to $100,000 per month.The accounts payable balance on March 31 totals $190,000,which will be paid in April.
All units are sold on account for $14 each.Cash collections from sales are budgeted at 60% in the month of sale,30% in the month following the month of sale,and the remaining 10% in the second month following the month of sale.Accounts receivable on April 1 totalled $500,000 ($90,000 from February's sales and the remainder from March).
Required:
a)Prepare a schedule for each month showing budgeted cash disbursements for Clay Company.
b)Prepare a schedule for each month showing budgeted cash receipts for Clay Company.

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Definitions:

Implied Contract

A contract that arises not from words of agreement but from the conduct of the parties.

Executory Contract

An executory contract is a contract that has not yet been fully performed or completed by one or more parties.

Agreed Upon

A condition or decision reached by two or more parties after a negotiation or discussion.

Hula Hoop

A large hoop that can be twirled around the waist, limbs, or neck for sport or entertainment.