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Lagoon and Russell Company

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E23-13 Blue Lagoon Corporation is projecting a cash balance of $31,000 in its December 31,
2011, balance sheet. Blue Lagoon’s schedule of expected collections from customers for the first
quarter of 2012 shows total collections of $180,000. The schedule of expected payments for direct
materials for the first quarter of 2012 shows total payments of $41,000. Other information gathered
for the first quarter of 2012 is: sale of equipment $3,500, direct labor $70,000, manufacturing
overhead $35,000, selling and administrative expenses $45,000, and purchase of securities $12,000.
Blue Lagoon wants to maintain a balance of at least $25,000 cash at the end of each quarter.

Prepare a cash budget for the first quarter.

E24-5 Russell Company uses flexible budgets to control its selling expenses. Monthly sales are
expected to range from $170,000 to $200,000. Variable costs and their percentage relationship to
sales are: Sales Commissions 5%, Advertising 4%, Traveling 3%, and Delivery 2%. Fixed selling
expenses will consist of Sales Salaries $34,000, Depreciation on Delivery Equipment $7,000, and
Insurance on Delivery Equipment $1,000.

Prepare a monthly flexible budget for each $10,000 increment of sales within the relevant range
for the year ending December 31, 2012.

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