Problem 8-31 Completing a Master Budget

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter:

1. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances:

2. Actual sales for December and budgeted sales for the next four months are as follows:

3. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales.

4. The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.)

5. Monthly expenses are budgeted as follows: salaries and wages, $38,000 per month: advertising, $58,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $45,780 for the quarter.

6. Each month’s ending inventory should equal 25% of the following month’s cost of goods sold.

7. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month.

8. During February, the company will purchase a new copy machine for $3,300 cash. During March, other equipment will be purchased for cash at a cost of $81,500.

9. During January, the company will declare and pay $45,000 in cash dividends.

10. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter.

Required:

Using the data above, complete the following statements and schedules for the first quarter:

1. Schedule of expected cash collections:

2-a. Merchandise purchases budget:

2-b. Schedule of expected cash disbursements for merchandise purchases:

3. Cash budget:

1. Complete the Schedule of expected cash collections:

2A. Complete the merchandise purchases budget:

2B. Complete the schedule of expected cash disbursements for merchandise purchases.

3. Complete the cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)

Suppose that instead of financing its spending by borrowing money, the government raised taxes to pay for the increase in spending. If the size of the recessionary gap is $200,000 and the MPC is .9, by how much would the government need to increase tax to have enough money to close the gap? Hint: you need to calculate the increase in government spending needed first and then keep in mind that the increase in tax decreases consumer spending. The goal is to increase GDP by $200,000.

Red Canyon T-shirt Company operates a chain of T-shirt shops in the southwestern United States. The sales manager has provided a sales forecast for the coming year, along with the following information:

Each T-shirt is expected to sell for $21.

The purchasing manager buys the T-shirts for $8 each.

The company needs to have enough T-shirts on hand at the end of each quarter to fill 31 percent of the next quarter’s sales demand.

Selling and administrative expenses are budgeted at $62,000 per quarter plus 18 percent of total sales revenue.

Required:
1. Determine budgeted sales revenue for each quarter

2. Determine budgeted cost of merchandise purchased for each quarter

3. Determine budgeted cost of good sold for each quarter.

4. Determine selling and administrative expenses for each quarter.

5. Complete the budgeted income statement for each quarter.

Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $50. Wesley expects the following unit sales: January 2,500 February 2,300 March 3,100 April 2,600 May 2,300 Wesley’s ending finished goods inventory policy is 35 percent of the next month’s sales. Suppose each handisaw takes approximately .35 hours to manufacture, and Wesley pays an average labor wage of $14.50 per hour. Each handisaw requires a plastic housing that Wesley purchases from a supplier at a cost of $6.00 each. The company has an ending raw materials inventory policy of 10 percent of the following month’s production requirements. Materials other than the housing unit total $4.50 per handisaw. Manufacturing overhead for this product includes $60,000 annual fixed overhead (based on production of 24,000 units) and $.90 per unit variable manufacturing overhead. Wesley’s selling expenses are 6 percent of sales dollars, and administrative expenses are fixed at $15,000 per month.

question demand: compute the budgeted cost of goods sold in the first quarter: jan feb and march

budgeted cost of goods sold

budgeted selling and administrative expenses

budgeted income statement for the quarter ending in march

• explain the effects of changes in the level of domestic demand for goods (I, G or C) on the equilibrium level of Y, domestic import spending, and on the level of NX ?
• explain the effects of changes in foreign demand for domestic (exportable) goods on the equilibrium level of Y, the NX function, and the level of NX ?

Madoff Construction Company uses the percentage of completion method (cost to cost method) for their long term construction contracts.....

They were working on a contract for which they would receive $900,000 at completion....

In 2024, they reported a gross profit of 58,440.....

2025 was a disastrous year for the company. As of the end of the year, they had incurred costs of $800,000 (which includes costs for both 2024 and 2025) , and think it is going to cost 120,266 to finish the project.

How much of a loss should they report in 2025? (Enter the loss as a positive number...Example: loss of "150,000".)

Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: a. As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 43,000 Accounts receivable 202,400 Inventory 58,200 Buildings and equipment (net) 353,000 Accounts payable $ 86,025 Common stock 500,000 Retained earnings 70,575 $ 656,600 $ 656,600 b. Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $253,000 January $388,000 February $585,000 March $299,000 April $196,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The accounts receivable at December 31 are a result of December credit sales. d. The company’s gross margin is 40% of sales. (In other words, cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages, $18,000 per month: advertising, $58,000 per month; shipping, 5% of sales; other expenses, 3% of sales. Depreciation, including depreciation on new assets acquired during the quarter, will be $42,580 for the quarter. f. Each month’s ending inventory should equal 25% of the following month’s cost of goods sold. g. One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid in the following month. h. During February, the company will purchase a new copy machine for $1,300 cash. During March, other equipment will be purchased for cash at a cost of $71,500. i. During January, the company will declare and pay $45,000 in cash dividends. j. Management wants to maintain a minimum cash balance of $30,000. The company has an agreement with a local bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. The company would, as far as it is able, repay the loan plus accumulated interest at the end of the quarter. Required: Using the data above, complete the following statements and schedules for the first quarter: 1. Schedule of expected cash collections: 2-a. Merchandise purchases budget: *$388,000 sales × 60% cost ratio = $232,800. †$351,000 × 25% = $87,750. 2-b. Schedule of expected cash disbursements for merchandise purchases: 3. Cash budget. (Cash deficiency, repayments and interest should be indicated by a minus sign.)