Question

The beauty behind excel is that managers can perform what-if analysis just by changing the data, so you do not need to retype the budgets if you have used cell references and formulas throughout.

Data Scenario: You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has not been a priority of the company and that they have been experiencing cash shortages. You have contacted various areas on the organization and have accumulated the information below to assist you in preparing a comprehensive budget.                                                                                                                              

The following is actual information that relates to the operations of a merchandiser named Sled Company, a wholesaler of sleds as of March 31.          Cash $1,000 Accounts receivable 13,680 Inventory 10,757 Accounts Payable $15,781

Actual and Budgeted sales dollar Data-Sales Budget: March (actual) $38,000 April $36,000 May $37,000 June $39,000 July $35,000                                               

Sales are the following type: 64% Cash sales collected in month of sale 36% Credit sales collected in the following month of sale    Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. Cost of goods sold equals    83%       of sales price                                                                     

At the end of each month, inventory is to be on hand(ending inventory) equal to 36% of following month's sales needs, stated at cost. Inventory purchases are paid 49% in month of purchase 51% in month after purchase. The accounts payable at March 31 is a result of March purchases of inventory. I have set up a calculation on the budget worksheet to show you this calculation.                                                                                                                      

Monthly selling expenses are as follows and are paid in the month incurred if it is a cash expense. Salaries and wages 8% of sales dollar Commissions 3% of sales dollar Advertising      $900     per month Utilities          $200 per month                                                                               

Monthly general and administrative expenses are as follows and are paid in the month incurred if it is a cash expense. Rent $2,000 per month Depreciation $500 for month                                                                     

Required: You must use cell references on the BudgetSolution worksheet, by referencing this worksheet that contains the data.              Prepare the following second quarter budgets and answer the questions listed on the template provided on the BudgetSolution Worksheet. I have adapted the budget model to meet the needs of this company. If I bolded a line item, that is a header and does not need computation on that row. Please note the quarter column is for the quarter so not all lines should be added across in the quarter column. When you have beginning and ending inventory or cash balances this is for the quarter and should be brought over to the quarter column.                                                                                                                        

1. Prepare Sales Budget in dollars by month and quarter.                                                                                                                              

2. Prepare a merchandise purchase budget by month and quarter in dollars.                                                                                                                      

3. Prepare a Selling Expense Budget, by month and quarter.                                                                                     

Answer 1

1.

Sales Budget
	April	May	June	Quarter
Sales Revenue	$         36,000	$          37,000	$       39,000	$     112,000

2.

Merchandise Purchase Budget
	April	May	June	Quarter
Cost of Goods Sold	$         29,880	$          30,710	$       32,370	$       92,960
Add : Desired Ending Inventory	$         11,056	$          11,653	$       10,458	$       10,458
Total Needs	$         40,936	$          42,363	$       42,828	$     103,418
Less : Beginning Inventory	$         10,757	$          11,056	$       11,653	$       10,757
Required Inventory Purchases	$         30,179	$         31,307	$      31,175	$       92,661

Working

Merchandise Purchase Budget
	April	May	June
Cost of Goods Sold	=36000*83%	=37000*83%	=39000*83%
Add : Desired Ending Inventory	=30710*36%	=32370*36%	=35000*83%*36%

Ending Inventory for previous month is beginning inventory for the month

3.

Selling Expense Budget
	April	May	June	Quarter
Salaries and Wages	$           2,880	$            2,960	$         3,120	$         8,960
Commission	$           1,080	$            1,110	$         1,170	$         3,360
Advertising	$               900	$               900	$            900	$         2,700
Utilities	$               200	$               200	$            200	$            600
Total Selling Expenses	$           5,060	$            5,170	$         5,390	$       15,620