Jimi, Inc., is preparing its master budget for the quarter ended December 31. It

Question

Jimi, Inc., is preparing its master budget for the quarter ended December 31. It sells a single product for $55 each. Seventy percent of all sales are on credit. Cash is paid for the remaining sales. All credit sales are collected in the month following the sale. The balance in accounts receivable is $12,000 on September 30, which represents the uncollected balance on September's sales. Budgeted sales for the next four months follow: Oct 980, Nov 1200, Dec 850, Jan 1190

The unit cost is $30. The company prefers an ending inventory is 55% of the following month's sales. September's inventory is 480 units. Dane, Inc. pay for 60% of the current month's purchases and 40% in the following month. The A/P balance on September 30 is $9800, which represents unpaid purchases.

Monthly operating expenses: -

Commissions (10% of sales)

Shipping (4.2% of sales)

Office salaries ($750 per week-assume each month has 4 weeks)

Rent ($5000 per month)

Depreciation is $3300 per month. Income taxes are 40%, and will be paid on March 31. There are $2500 in taxes payable on December 31. The company requires $10000 minimum monthly cash balance. The cash balance as of September is $12000. Loans are obtained at the end of any month whn the minimum cash balance is not met. Interest is 3% per month based on teh beginning of the month loan balance and is paid at the end of each month. If the monthly ending cash balance is over $10000, loans are repaid at the end of the month. As of September 30, the loan balance is $900. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of October, November, and December. Include the sales budget, table of cash receipts, merchandise purchases budget, table of cash disbursements for purchase of merchandise, Table of cash disbursements for selling and administrative expenses, cash budget, including information on the loan balance, budgeted income statement.

Explanation / Answer

Jimi Inc. All Amounts in $ Master Budget for the three month period ended December 31 Sales Budget October November December Total Sales quantity (Nos.) 980 1200 850 3030 Rate per unit 55 55 55 55 Total Sales Value 53900 66000 46750 166650 Cash Sales @ 30% 16170 19800 14025 49995 Credit Sales @ 70% 37730 46200 32725 116655 Collections from Customers Budget October November December Total Collections from Cash Sales 16170 19800 14025 49995 Collections from Credit Sales September 12000 12000 October 37730 37730 November 46200 46200 December 0 Total Collections 28170 57530 60225 145925 Merchandise Purchase Budget October November December Total Opening FG Inventory (units) 480 660 468 480 Purchases 1160 1008 1037 3205 Sales 980 1200 850 3030 Closing FG Inventory (units) 660 468 655 655 Rate per unit purchased 30 30 30 30 Purchase Cost 34800 30240 31110 96150 Cash Payments for Merchandise Purchase Budget October November December Total Payments for Purchases September 9800 9800 October 20880 13920 34800 November 18144 12096 30240 December 18666 18666 Total Disbursements 30680 32064 30762 93506 Operating Expenses Budget October November December Total Cash Operating Expenses Commissions (10% of sales) 5390 6600 4675 16665 Shipping (4.2% of sales) 2263.8 2772 1963.5 6999.3 Office salaries ($750 per week) 3000 3000 3000 9000 Rent ($5000 per month) 5000 5000 5000 15000 Income Taxes Paid 2500 2500 Total Cash Operating Expenses 15653.8 17372 17138.5 50164.3 Non-Cash Operating Expenses Depreciation 3300 3300 3300 9900 Total Operating Expenses 18953.8 20672 20438.5 60064.3 Cash Budget October November December Total Opening Cash Balance 12000 10036.2 10087.45 12000 Opening Loan Balance 900 17100 9100 900 Collections from Customers 28170 57530 60225 145925 Loan Taken 16200 16200 56370 67566 70312 157925 Purchase Disbursements 30680 32064 30762 93506 Cash Operating Expenses 15654 17372 17139 50164 Loan Repaid 8000 9100 17100 Interest on Loan 43 23 66 Closing Cash Balance 10036 10087 13289 14189 Closing Loan Balance 17100 9100 0 0 Income Statement Sales 166650 Purchase Cost 96150 Contribution Margin 70500 Less : Cash Operating Expenses 50164 Less : Depreciation 9900 60064 Net Income before Taxes 10436 Tax Impact @ 40% 4174 Net Income post Taxes 6261

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