Question

In: Accounting

a. Sales budget b. Inventory, purchases, and cost of goods sold budget c. Operating expense budget...

a. Sales budget

b. Inventory, purchases, and cost of goods sold budget

c. Operating expense budget

d. Budgeted income statement

Data:

Operating expenses include sales commission – 10% of Sales

Insurance Expense – $400

Depreciation Expense – $1,200

Rent Expense – $1000

Utility Expense – $800

Michael’s Enterprise sells washing machines. Actual sales for the month ended June 30 were $30,000. Manuel expects sales to increase 7% in July and increase another 4% over July sales in August. Cash sales are expected to be 60% of total sales and credit sales about 40% of sales. Cost goods sold should be 60% of the total sales. Manuel does not want inventory to fall below $4,000 plus 10% of cost of goods sold for the next month. Sales of $35,000 are expected for September. Inventory for June 30 is $6,000.

Expert Solution

A.

Where the price per unit is expected to remain constant during the period for all units in sales, the sales budget format will be simple as shown below.

michael enterprices
Sales Budget


	Quarter
month	1. june	2. july	3. augusst	4. september	total
actual sales	$30,000
increase in sales		7 %	4 % over july
Total Sales	$30,000	$32,100	$ 33384	$35,000	$130484

However if a business sells more than one product having different prices or the price per unit is expected to change during the period, its sales budget will be detailed.

B.

Ending Inventory = (Beginning Inventory + Net Purchases) - (Cost of goods sold)

The calculation of inventory purchases is: $6000 - $ 78290 = $ 72290

(Ending inventory - Beginning inventory) + Cost of goods sold = Inventory purchases

$72290 - $6,000. + $ 78,290 = $ 144580

formula for cost of goods sold is:

Beginning inventory + inventory purchases – end inventory = cost of goods sold

here cogs = 60% of total sales

60% of $130,484 = $78,290

C. Operating expense budget = net sales - cogs - operatin expense

$ 49134 = $ 130484 - $ 78290 - $3060

d. BUDGED INCOME STATEMENT

SALES $130484

COST OF GOODS SOLD ($78,290)

NET INCOME = $ 52194

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