Compute the total cash budgeted to be collected in March if sales forecasts are

Question

Compute the total cash budgeted to be collected in March if sales forecasts are $360,000 for January, $400,000 for February, and $450,000 for March. Purchases Budget Renovation Lighting Supply plans inventory levels (at cost) at the end of each month as follows: May, $275,000: June, $220,000; July. $200,000; and August, $240,000. Sales are expected to be June, $440,000; July, $350,000; and August, $300,000. Cost of goods sold is 60% of sales. Purchases in April were $250,000 and in May they were $180,000. Payments for each month's purchases are made as follows: 10% during that month, 80% the next month, and the final 10% the next month. Prepare budget schedules for June, July, and August for purchases and for disbursements for purchases. Purchases Budget Linkenheim GmbH has adopted the following policies regarding merchandise purchases and inventory. At the end of any month, the inventory should be 15,000 plus 90% of the cost of goods to be sold during the following month. The cost of merchandise sold averages 60% of sales. Purchase terms are generally net, 30 days. A given month's purchases are paid as follows: 20% during that month and 80% during the following month. Purchases in May had been 150,000 and the inventory on May 31 was higher than planned at 210,000. The manager was upset because the inventory was too high. Sales are expected to be June, 300,000; July, 290,000; August, 40,000; and September, 400,000. Compute the amount by which the inventory on May 31 exceeded the company's policies. Prepare budget schedules for June, July, and August for purchase and for disbursements for purchases.

Explanation / Answer

This solution is comprised of a detailed explanation to answer what type of budgets that the financial budget process includes.

7-33 Purchases Budget
Adobo Lighting Emporium plans inventory levels (at cost) at the end.

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