Question

1. Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 6 percent for peaches and 11 percent for oranges. The current year’s sales revenue data follow:

   	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
   Peaches	$	238,000		$	258,000		$	318,000		$	258,000		$	1,072,000
   Oranges		419,000			469,000			589,000			399,000			1,876,000
   Total	$	657,000		$	727,000		$	907,000		$	657,000		$	2,948,000

   Based on the company’s past experience, cost of goods sold is usually 70 percent of sales revenue. Company policy is to keep 20 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (Hint: Use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)

   Prepare the company’s sales budget for the next year for each quarter by individual product.

2. If the selling and administrative expenses are estimated to be $670,000, prepare the company’s budgeted annual income statement.

3. Ms.Jasper estimates next year’s ending inventory will be $35,100 for peaches and $56,000 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

Answer 1

1. Contribution sales budget

	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Peaches	$252,280	$273,480	$337,080	$273,480	$1,136,320
Oranges	$465,090	$520,590	$653,790	$442,890	$2,082,360
Total	$717,370	$794,070	$990,870	$716,370	$3,218,680

2. Budgeted annual income statement

Sales revenue	$3,218,620
Cost of goods sold	($2,253,076)
Gross profit	$965,604
Selling and administrative expense	$670,000
Net income	$295,604

3. Inventory Purchase budget

	Quarter 1	Quarter 2	Quarter 3	Quarter 4	Total
Peaches
Sales	$252,280	$273,480	$337,080	$273,480	$1,136,320
Cost of goods sold	$176,596	$191,436	$235,956	$191,436	$795,424
Desired Ending inventory	$38,287	$47,191	$38,287	$35,100	$35,100
Total Inventory required	$214,883	$238,627	$274,243	$226,536	$830,524
Less: Beginning Inventory	$35,319	$38,287	$47,191	$38,287	$35,319
Budgeted Inventory	$179,564	$200,340	$227,052	$188,249	$795,205
Oranges:
Sales	$465,090	$520,590	$653,790	$442,890	$2,082,360
Cost of goods sold	$325,563	$364,413	$457,653	$310,023	$1,457,652
Desired Ending inventory	$72,883	$91,531	$62,005	$56,000	$56,000
Total Inventory required	$398,446	$455,944	$519,658	$366,023	$1,513,652
Less: Beginning Inventory	$65,113	$72,883	$91,531	$62,005	$65,113
Total budgeted inventory	$333,333	$383,061	$428,127	$304,018	$1,448,539

______×______