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	$	229,000		$	249,000		$	309,000		$	249,000		$	1,036,000
Oranges		410,000			460,000			580,000			390,000			1,840,000
Total	$	639,000		$	709,000		$	889,000		$	639,000		$	2,876,000

Based on the company’s past experience, cost of goods sold is usually 65 percent of sales revenue. Company policy is to keep 15 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

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

If the selling and administrative expenses are estimated to be $610,000, prepare the company’s budgeted annual income statement.

Ms.Jasper estimates next year’s ending inventory will be $35,500 for peaches and $56,400 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

Answer 1

1. Sales Budget for next yeat quarterwise

Estimation bases on sales will increase 3 percent for peaches and 8 percent for orange

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Peaches	$	2,35,870	$	2,56,470	$	3,18,270	$	2,56,470	$	10,67,080
Oranges		4,42,800	0	4,96,800	0	6,26,400	0	4,21,200		19,87,200
Total	$	6,78,670	$	7,53,270	$	9,44,670	$	6,77,670	$	30,54,280

2. Budgeted Purchase for next year

	Budgeted Purchase	Peaches	Oranges
1	Sales for budgeted first quarter	2,35,870	4,42,800
2	Cost of goods sold (65% of Sale)	1,53,316	2,87,820
3	Current year Ending Inventory	22,997	43,173
	(15% of next quarter (2))
4	Budgeted Year Sale	10,67,080	19,87,200
5	Cost of goods sold (65% of Sale)	6,93,602	12,91,680
6	Budgeted Year Ending Inventory	35,500	56,400
7	Purchase Cost for Budget Year	6,81,099	12,78,453
	(3) + (5) - (6)

Company’s budgeted annual income statement for next year

Annual Income Statement	Peaches	Oranges	Total
Budgeted Sales Revenue	10,67,080	19,87,200	30,54,280
(-) Budgeted Purchase Cost	6,81,099	12,78,453	19,59,552
Gross Revenue	3,85,981	7,08,747	10,94,728
(-) Selling and Administrative Expenses			6,10,000
Budgeted Net Income Revenue			4,84,728

3. Inventory purchases budgets quarterwise

Peaches	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Opening Invetory	$	22,997	$	25,006	$	31,031	$	25,006	$	22,997
Cost of goods sold	$	1,53,316	$	1,66,706	$	2,06,876	$	1,66,706	$	6,93,602
Closing Inventory	$	25,006	$	31,031	$	25,006	$	35,500	$	35,500
Budgeted Purchase	$	1,51,307	$	1,60,680	$	2,12,901	$	1,56,211	$	6,81,099

Oranges	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
Opening Invetory	$	43,173	$	48,438	$	61,074	$	41,067	$	43,173
Cost of goods sold	$	2,87,820	$	3,22,920	$	4,07,160	$	2,73,780	$	12,91,680
Closing Inventory	$	48,438	$	61,074	$	41,067	$	56,400	$	56,400
Budgeted Purchase	$	2,82,555	$	3,10,284	$	4,27,167	$	2,58,447	$	12,78,453