Question

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

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                   

5. Prepare a cash budget showing the months and quarter.

Beginning cash
Add Cash Collections of Sales:
Cash sales collected in month sale
Credit sales Collected in following month
Total Cash receipts from collection of sales
Cash Available for operations
Less Cash Disbursements:
Cash payments for purchases paid in month
Cash payments made in month after purchase
Total Cash payments for merchandise purchased
Cash Variable Selling Expenses
Cash General and administrative expenses
Total cash Disbursements
Ending cash

Answer 1

Budget