Question
In: Accounting
The Bag Corporation is a distributor of high end golf bags. In the past, The Bag...
The Bag Corporation is a distributor of high end golf bags. In the past, The Bag Corporation produced and sold the golf bags. Over time, they realized it was cheaper to buy the golf bags fully assembled and resell them to the public, therefore eliminating their need for a manufacturing plant. The Bag Corporation pays $60 per golf bag and sells them for $180.
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Prepare a 2021 (January – December) Revenue Budget (for units and sales dollars) for The Bag Corporation. They anticipate selling 6,000 golf bags in January 2021 and increasing that number by 1% each month.
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Prepare a 2021 Purchases Budget (for units and cost) for The Bag Corporation. They plan to have 5,000 golf bags on hand at December 31, 2020. The Bag Corporation purchases golf bags once a month and bases their purchase on 95% of the next months projected sales. (In December 2020, The Bag Corporation plans to sell 5,500 golf bags and will purchase 5,700 golf bags [January 2021 projected sales of 6,000 golf bags x 95%]. In January 2021, The Bag Corporation plans to sell 6,000 golf bags and will purchase 5,757 golf bags [February 2021 projected sales of 6,060 golf bags x 95%]).
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Prepare a 2021 Cash Collections Budget for The Bag Corporation. 70% of The Bag Corporation sales are cash sales and 30% are credit sales. The credit sales are collected the following month.
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Prepare a 2021 Operating Expenses Budget for The Bag Corporation. Administrative Expenses are $300,000 per month and are fixed. Marketing Expenses are 4% of the current month’s sales. Storage/Distribution Expenses are $6 per golf bag sold in each month.
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Prepare a 2021 Cash Disbursements Budget for The Bag Corporation. The Bag Corporation pays for the golf bags on credit but must make full payment within 30 days. All Administrative, Marketing and Storage/Distribution expenses are paid in the current month.
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Prepare a Budgeted Income Statement for the year ended December 31, 2021.
Solutions
Expert Solution
1.
| Revenue budget | ||||||||||||
| January | February | March | April | May | June | July | August | September | October | November | December | |
| Sales in units | 6,000 | 6,060 | 6,121 | 6,182 | 6,244 | 6,306 | 6,369 | 6,433 | 6,497 | 6,562 | 6,628 | 6,694 |
| Selling Price per unit | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 | $ 180.00 |
| Sales Revenue | $ 10,80,000.00 | $ 10,90,800.00 | $ 11,01,708.00 | $ 11,12,725.08 | $ 11,23,852.33 | $ 11,35,090.85 | $ 11,46,441.76 | $ 11,57,906.18 | $ 11,69,485.24 | $ 11,81,180.09 | $ 11,92,991.90 | $ 12,04,921.81 |
2.
| Purchase Budget | ||||||||||||
| January | February | March | April | May | June | July | August | September | October | November | December | |
| Sales in units | 6,000 | 6,060 | 6,121 | 6,182 | 6,244 | 6,306 | 6,369 | 6,433 | 6,497 | 6,562 | 6,628 | 6,694 |
|
Purchases (95% of next month sales) |
5,757 | 5,815 | 5,873 | 5,931 | 5,991 | 6,051 | 6,111 | 6,172 | 6,234 | 6,296 | 6,359 | 6,423 |
| Cost per unit | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 |
| Total Purchase cost | $ 3,45,420.00 | $ 3,48,874.20 | $ 3,52,362.94 | $ 3,55,886.57 | $ 3,59,445.44 | $ 3,63,039.89 | $ 3,66,670.29 | $ 3,70,336.99 | $ 3,74,040.36 | $ 3,77,780.77 | $ 3,81,558.57 | $ 3,85,374.16 |
3.
| Cash Collection Budget | ||||||||||||
| January | February | March | April | May | June | July | August | September | October | November | December | |
| Sales Revenue | 1080000 | 1090800 | 1101708 | 1112725.08 | 1123852.331 | 1135090.854 | 1146441.763 | 1157906.18 | 1169485.242 | 1181180.094 | 1192991.895 | 1204921.814 |
| Cash Sales 70 % (A) | 7,56,000 | 7,63,560 | 7,71,196 | 7,78,908 | 7,86,697 | 7,94,564 | 8,02,509 | 8,10,534 | 8,18,640 | 8,26,826 | 8,35,094 | 8,43,445 |
| Credit Sales (30%) | $ 3,24,000.00 | $ 3,27,240.00 | $ 3,30,512.40 | $ 3,33,817.52 | $ 3,37,155.70 | $ 3,40,527.26 | $ 3,43,932.53 | $ 3,47,371.85 | $ 3,50,845.57 | $ 3,54,354.03 | $ 3,57,897.57 | $ 3,61,476.54 |
| Credit sales collected in next month (B) | $ 3,24,000.00 | $ 3,27,240.00 | $ 3,30,512.40 | $ 3,33,817.52 | $ 3,37,155.70 | $ 3,40,527.26 | $ 3,43,932.53 | $ 3,47,371.85 | $ 3,50,845.57 | $ 3,54,354.03 | $ 3,57,897.57 | |
| Total Cash Collection (A + B) | $ 7,56,000.00 | $ 10,87,560.00 | $ 10,98,435.60 | $ 11,09,419.96 | $ 11,20,514.16 | $ 11,31,719.30 | $ 11,43,036.49 | $ 11,54,466.85 | $ 11,66,011.52 | $ 11,77,671.64 | $ 11,89,448.36 | $ 12,01,342.84 |
Since Account receivable at beginning of the year are not provided hence not taken in account.
4.
| Operting Expense Budget | ||||||||||||
| January | February | March | April | May | June | July | August | September | October | November | December | |
| Administrative Expense | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 | $ 3,00,000.00 |
| Marketing Expense (4% of sales ) | $ 43,200.00 | $ 43,632.00 | $ 44,068.32 |
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