CampingFun, Inc produces a highly absorbent camping towel. They are working on the budgets for January,...

CampingFun, Inc produces a highly absorbent camping towel. They are working on the budgets for January, February, & March (Q1) and have asked for your help. The unit sales forecast for the next four months is:

January	February	March	April
20,000	25,000	32,000	33,000

The towels sell for $15 each. Traditionally, 20% of the sales are made in cash and the remaining 80% are made on store credit. The credit sales are collected 10% in the current month and 90% in the next month. December sales are budgeted at $275,000.

CampingFun likes to maintain an ending inventory of finished goods of 10% of next month’s projected sales forecast. Each towel cost CampingFun $5 to buy.

Complete the following budgets for

Sales budget (for January, February & March)

Cash Receipts budget (February only)

Determine the following balances
1. Sales revenue on the Q1 Pro-forma income statement
1. Accounts Receivable amount on the March 31 balance sheet
1. COGS on the Q1 Pro-forma income statement
2. Inventory Dollar value on the March 31 balance sheet

Solutions

Expert Solution

Answer a.

Answer b.

Cash receipts in February = February cash sales + 10% * February credit sales + 90% * January credit sales
Cash receipts in February = $75,000 + 10% * $300,000 + 90% * $240,000
Cash receipts in February = $321,000

Answer c.

Sales revenue = January sales + February sales + March sales
Sales revenue = $300,000 + $375,000 + $480,000
Sales revenue = $1,155,000

Answer d.

Accounts receivable on March 31 = 90% * March credit sales
Accounts receivable on March 31 = 90% * $384,000
Accounts receivable on March 31 = $345,600

Answer e.

Units sold during Quarter 1 = Units sold in January + Units sold in February + Units sold in March
Units sold during Quarter 1 = 20,000 + 25,000 + 32,000
Units sold during Quarter 1 = 77,000

Cost of goods sold during Quarter 1 = Units sold during Quarter 1 * Cost per unit
Cost of goods sold during Quarter 1 = 77,000 * $5
Cost of goods sold during Quarter 1 = $385,000

Answer f.

Ending inventory in units on March 31 = 10% * Units sold in April
Ending inventory in units on March 31 = 10% * 33,000
Ending inventory in units on March 31 = 3,300

Ending inventory in dollars on March 31 = Ending inventory in units on March 31 * Cost per unit
Ending inventory in dollars on March 31 = 3,300 * $5
Ending inventory in dollars on March 31 = $16,500

ekkarill92 answered 1 year ago

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