Garza Company expects to have a cash balance of $46,000 on January 1, 2012.
Relevant monthly budget data for the first 2 months of 2012 are as follows.
Collections from customers: January $85,000, February $150,000.
Payments for direct materials: January $50,000, February $70,000.
Direct labor: January $30,000, February $45,000. Wages are paid in the month they are incurred.
Manufacturing overhead: January $21,000, February $25,000. These costs include depreciation of $1,000 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $15,000, February $20,000. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $10,000 in cash. Garza Company has a line of credit at a local bank that enables it to borrow up to $25,000. The company wants to maintain a minimum monthly cash balance of $20,000.