Integrated purchases and cash payments budget – Senegalese Specialties, a retail
ID: 2497149 • Letter: I
Question
Integrated purchases and cash payments budget – Senegalese Specialties, a retailer of West African food products, has completed the sales forecast for the coming year:
Senegalese Specialties maintains an ending inventory level of 60 percent of the following month’s cost of goods sold. The company’s cost of goods sold is 35 percent of sales.
Required:
a. Prepare Senegalese Specialties purchases budget for June and July. Use the following format:
b. Assuming that Senegalese Specialties pays for 50 percent of its purchases in the month of purchase and the remaining 50 percent in the month following the purchase, prepare the company’s cash payments budget for July.
2.
J Bryson, Ltd. is a local coat retailer. The store’s accountant prepared the following income statement for the month ended January 31.
Bryson sells its coats for $250 each. Selling expenses consist of fixed costs plus a commission of $6.50 per coat. Administrative expenses consist of fixed costs plus a variable component equal to 6% of sales.
Required:
Prepare a contribution format income statement for January.
Using the format y = mx + b, develop a cost formula for the operating expenses.
If 2,700 coats are sold next month, what is the expected total contribution margin?
January $37,000 July $38,000 February $38,000 August $37,000 March $32,000 September $33,000 April $40,000 October $40,000 May $36,000 November $48,000 June $31,000 December $52,000Explanation / Answer
Solution:
June
July
Budgeted Sales dollars
31000
38000
X
Cost of goods sold percentage
35
35
=
Cost of goods sold
10850
13300
+
Ending inventory
22800
22200
=
Total inventory required
33650
35500
-
Beginning inventory
18600
22800
=
Budgeted purchase
15050
12700
Sales Revenue
750,000
Variable Cost
Selling Expenses
19500
Administrative expenses
45000
Total Variable Cost
64500
Contribution
685500
Fixed Cost
4060 + 4500
Income
676940
Formula for operating expenses
Fixed costs = Fixed component of selling expense + Fixed component of Administrative expense + Number of units * Variable component of selling and administrative expense
= 4060 + 45000 + (6.5 + 15) *No. of units
= 49060 + 21.5 No. of units
Y = 21.5 x + 49060, where x is no. of units sold
Total contribution for 2700 coats is
Sales = 250*2700 = 675000
Variable Costs, Selling expense = 6 % of 675000 + Administrative cost 2700*6.5 = 58050
Contribution = 616950
June
July
Budgeted Sales dollars
31000
38000
X
Cost of goods sold percentage
35
35
=
Cost of goods sold
10850
13300
+
Ending inventory
22800
22200
=
Total inventory required
33650
35500
-
Beginning inventory
18600
22800
=
Budgeted purchase
15050
12700
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