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 7 percent for peaches and 12 percent for oranges. The current year’s sales revenue data follow:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	228,000		$	248,000		$	308,000		$	248,000		$	1,032,000
Oranges		412,000			462,000			582,000			392,000			1,848,000
Total	$	640,000		$	710,000		$	890,000		$	640,000		$	2,880,000

Based on the company’s past experience, cost of goods sold is usually 65 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

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

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

3. Ms.Jasper estimates next year’s ending inventory will be $34,100 for peaches and $56,500 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product

a

First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Peaches	not attempted	not attempted	not attempted	not attempted	$0
Oranges	not attempted	not attempted	not attempted	not attempted	$0
Total	$0	$0	$0	$0	$0

b

JASPER FRUITS CORPORATION
Budgeted Annual Income Statement
Sales revenue	not attempted
Cost of goods sold	not attempted
Gross profit	0
	not attempted
Net income	$0

c

First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Salesselected answer correct	not attempted	not attempted	not attempted	not attempted
Cost of goods soldselected answer correct	not attempted	not attempted	not attempted	not attempted
Plus: Desired ending inventoryselected answer correct	not attempted	not attempted	not attempted	not attempted
Inventory needed	0	0	0	0
Less: Beginning inventoryselected answer correct	not attempted	not attempted	not attempted	not attempted
Required purchases	$0	$0	$0	$0

c2

First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Sales	not attempted	not attempted	not attempted	not attempted
Cost of goods sold	not attempted	not attempted	not attempted	not attempted
Plus: Desired ending invent	not attempted	not attempted	not attempted	not attempted
Inventory needed	0	0	0	0
Less: Beginning inventory	not attempted	not attempted	not attempted	not attempted
Required purchases	$0	$0	$0	$0

Answer 1

A. Company's sales budget for next year for each Quarter by individual product

	First quarter	Second Quarter	Third Quarter	Fourth quarter	Total
Preaches (Wn)	$243,960	$265,360	$329,560	$265,360	$1,104,240
Oranges(Wn)	$461,440	$517,440	$651,840	$439,040	$2,069,760
Total	$705,400	$782,000	$981,400	$704,400	$3,174,000

Working notes

a) Peaches	First Quarter	Second Quarter	Third Quarter	Fourth quarter	Total
Current year sales	$228,000	$248,000	$308,000	$248,000	$1,032,000
Expected increase in next year (7%)	$15,960	$17,360	$21,560	$17,360	$72,240
Budgeted sales for next year	$243,960	$265,360	$329,560	$265,360	$1,104,240
B) Oranges
Current year sales	$412,000	$462,000	$582,000	$392,000	$1,848,000
Expected increase in next year (12%)	$49,440	$55,440	$69,840	$47,040	$221,760
Budgeted sales for next year	$461,440	$517,440	$651,840	$439,040	$2,069,760

B. Budgeted Annual income statement

Sales revenue	$3,174,000
Cost of goods sold (65%)	$2,063,100
Gross profit	$1,110,900
Selling and administrative expense	$680,000
Net income	$430,900

C. Company's inventory Purchases budget

Peaches

	First quarter	Second Quarter	Third Quarter	Fourth quarter
Sales revenue	$243,960	$265,360	$329,560	$265,360
Cost of goods sold (65%)	$158,574	$172,484	$214,214	$172,484
Add: Desired Ending inventory	$34,497	$42,843	$34,497	$34,100
Inventory needed	$193,071	$215,327	$248,711	$206,584
Less: Beginning Inventory(20%)	$31,715	$34,497	$42,843	$34,497
Required Purchases	$161,356	$180,830	$205,868	$172,087

Oranges

	First quarter	Second Quarter	Third Quarter	Fourth quarter
Sales	$461,440	$517,440	$651,840	$439,040
Cost of goods sold (65%)	$299,936	$336,336	$423,690	$285,376
Add: Desired Ending inventory	$67,267	$84,739	$57,075	$56,500
Inventory needed	$367,203	$412,075	$480,771	$341,876
Less: Beginning Inventory(20%)	$59,987	$67,267	$84,739	$57,075
Required Purchases	$307,216	$353,808	$396,032	$284,801

* Cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.

____×____

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