Question

A company expects to sell 500 tables in April, 700 in May, and 650 in June. The company sells these tables for $120 per unit. 30% of its sales are cash sales and 70% of its sales are credit sales. Please construct a sales budget for April, May and June.

A company’s sales budget shows the following:

                                        April              May                 June

Cash Sales                     $5,000        $7,000            $8,000

Credit Sales                $20,000       $28,000          $32,000

The company had credit sales of $10,000 in February and $15,000 in March. Please prepare a schedule of cash collections for April, May and June, assuming that 24% of credit sales are collected in the month of the sale, 34% are collected in the month after the sale, and 42% are collected 2 months after the sale.

A company expects to sell 500 tables in April, 700 in May, 650 in June, and 800 in July. The company wants its inventory of tables at the end of each month to be equal to 15% of the following month’s unit sales, and its beginning inventory for April was 75 tables. Please construct a production budget for April, May and June.

A company expects to produce 600 tables in April, 800 in May, 750 in June, 900 in July. Each table requires 30 pounds of wood, and the wood costs $16 per pound. The company wants its inventory of wood at the end of each month to be equal to 25% of the following month’s usage of wood, and its beginning inventory for April was 4,500 pounds of wood. Please construct a direct materials budget for April, May and June.

Answer 1

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1. Sales Budget
	April	May	June	Total
Sales (units)	500	700	650	1850
Selling Price	120	120	120	120
Sales (dollars)	60000	84000	78000	222000
Cash Sale 30%	18000	25200	23400	66600
Credit Sale 70%	42000	58800	54600	155400

2. Schedule of collection from Sales	Working		Final Answer
	February	March	April	May	June	Total
Total Sale			60000	84000	78000	222000
Cash Sale A			5000	7000	8000	20000
Credit Sale	10000	15000	20000	28000	32000	80000
-24% of credit sale - same month B			4800	6720	7680	19200
-34% of credit sale - next month C			5100	6800	9520	21420
-42% of credit sale - 2 month D			4200	6300	8400	18900
Total Collection A+B+C+D			19100	26820	33600	79520

3. Production Budget
					Working
	April	May	June	Total	July
Estimate Sale Units	500	700	650	1850	800
Desired Ending Inventory 15% of next month sale	105	98	120	120	0
Total Units Needed	605	798	770	1970	800
Less: Beginning Inventory	75	105	98	75	120
Production Needed	530	693	673	1895	680

4. Direct Material Budget
	April	May	June	Total	July
Production Needs (30*Production)	18000	24000	22500	64500	27000
Desired Ending Inventory (25%)	6000	5625	6750	6750
Subtotal	24000	29625	29250	71250
Less: Beginning Inventory	4500	6000	5625	4500
Purchases Required	19500	23625	23625	66750
Per unit cost	16	16	16	16
Direct Material Budget (Purchases*cost per unit)	312000	378000	378000	1068000