Question

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 3 percent for peaches and 8 percent for oranges. The current year’s sales revenue data follow:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	237,000		$	257,000		$	317,000		$	257,000		$	1,068,000
Oranges		400,000			450,000			570,000			380,000			1,800,000
Total	$	637,000		$	707,000		$	887,000		$	637,000		$	2,868,000

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.)

Required

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

b. If the selling and administrative expenses are estimated to be $680,000, prepare the company’s budgeted annual income statement.

c. Ms.Jasper estimates next year’s ending inventory will be $35,900 for peaches and $57,400 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

Ms. Jasper estimates next year’s ending inventory will be 35,900 for peaches. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product. (Round your final answers to nearest whole dollar.)

	First Quarter Second Quarter Third Quarter Fourth Quarter Sales $244,110 $264,710 $326,510 $264,710 Cost of goods sold $170,877 $185,297 $228,557 $185,297 Plus: Desired ending inventory 35,900 Inventory needed 170,877 185,297 228,557 221,197 Less: Beginning inventory Required purchases $170,877 $185,297 $228,557 $221,197

Ms. Jasper estimates next year’s ending inventory will be 57,400 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product. (Round your final answers to nearest whole dollar.)

	First Quarter Second Quarter Third Quarter Fourth Quarter Sales Cost of goods sold Plus: Desired ending inventory Inventory needed 0 0 0 0 Less: Beginning inventory Required purchases $0 $0 $0 $0

Answer 1

1.

Sales Budget
	First Quarter		Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	1,100,040		$	1,133,041		$	1,167,032		$	1,202,043		$	4,602,157
Oranges		1,944,000			2,099,520			2,267,482			2,448,880			8,759,882
Total	$	3,044,040		$	3,232,561		$	3,434,514		$	3,650,924		$	13,362,039

2.

Budgeted annual income statement
	First Quarter		Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	1,100,040		$	1,133,041		$	1,167,032		$	1,202,043		$	4,602,157
Oranges		1,944,000			2,099,520			2,267,482			2,448,880			8,759,882
Total Sales	$	3,044,040		$	3,232,561		$	3,434,514		$	3,650,924		$	13,362,039
Cost of goods sold @ 70%														9,353,427
selling and administrative expenses														680,000
Net income														3,328,612

3. Peaches

	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Peaches sales	$	13,762,900		$	14,175,787		$	14,601,061		$	15,039,092
Cost of goods sold @ 70%		9,634,030			9,923,051			10,220,742			10,527,365
Opening inventory		1,926,806			1,984,610			2,044,148			2,105,473
Purchases (Balancing figure)		9,691,834			9,982,589			10,282,067			8,457,792
Closing inventory		1,984,610			2,044,148			2,105,473			35,900
Cost of goods sold @ 70%		9,634,030			9,923,051			10,220,742			10,527,365

Oranges

	First Quarter		Second Quarter			Third Quarter			Fourth Quarter
Oranges sales		10,101,701			10,909,837			11,782,624			12,725,234
Cost of goods sold @ 70%		7,071,191			7,636,886			8,247,837			8,907,664
Opening inventory		1,414,238			1,527,377			1,649,567			1,781,533
Purchases (Balancing figure)		7,184,330		#	7,759,076		#	8,379,802		#	7,183,531
Closing inventory		1,527,377			1,649,567			1,781,533			57,400
Cost of goods sold @ 70%		7,071,191			7,636,886			8,247,837			8,907,664