Choice is a retail company that sells specialized gardening products. The compan

Question

Choice is a retail company that sells specialized gardening products. The company is considering opening a new store on October 1, Year1. As budget coordinator, you have been asked to prepare a master budget for the first 3 months of the company’s operation. You have gathered the following information:

October sales are estimated to be $280000 of which 60 percent will be cash and the remainder will be on credit. The company expects all sales to increase at the rate of 25 percent per month for November and December. Sales in January Year 2 are expected to be $250000.

The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale.

Prepare a sales budget and a schedule of cash receipts using these facts and your excel template. Check your answers here before moving to the next part, by completing the cells requested in the chart below.

The cost of goods sold is 80 percent of sales. The company desires to maintain a minimum ending inventory equal to 30 percent of the next month’s cost of goods sold. (Ending inventory for December is based on budgeted January Year2 sales.)

Assume that all inventory purchases are made on account (on credit). The company pays 20 percent of accounts payable in the month of purchase and the remaining amount in the following month.

In excel, prepare an inventory purchases budget and a cash payments budget for inventory purchases. Use the check figures below before you continue.

Explanation / Answer

Choice Retail Company Requirement a Sales Budget October November December Total-Qtr Cash Sales 168000 210000 262500 640500 Sales on account 112000 140000 175000 427000 Total budgeted sales 280000 350000 437500 1067500 Requirement b Schedule of Cash Receipts October November December Total-Qtr Current cash sales 168000 210000 262500 640500 Plus collection from A/R 0 112000 140000 252000 Total collections 168000 322000 402500 892500 Requirement c Inventory purchases Budget October November December Total-Qtr Budgted cost of goods sold 224000 280000 350000 854000 Plus desired ending Inventory 84000 105000 75000 75000 Inventory Needed 308000 385000 425000 929000 Less : beginning inventory 67200 84000 105000 67200 Required purchases(on account) 240800 301000 320000 861800 Requirement d Cash Payments for Inventory Payment of current month's A/P 48160 60200 64000 172360 Payment of Prior month's A/P 192640 240800 433440 Total Budgted payments 48160 252840 304800 605800

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.