Purchases 1. Management requires that each month\'s units of ending inventory be

Question

Purchases 1. Management requires that each month's units of ending inventory be equal to the following month's unit sales. 2. Average purchase price is $11 per unit. 3. All purchases are on credit. 4, As from 1 July accounts payable will be paid 55% in the month of purchase and receive a 3% discount; and, 45% in the month after purchase. Operating Expenses 1. Monthly variable expenses, paid in the month they are incurred, will be: 7% of sales 6.5% of sales 1.5% of sales. Financial (excluding bad debts and discount allowed) 2. Monthly fixed expenses will ber on delivery vehicles $800 per month Administration depreciation on furniture and equipment $350 per month. Commission of $1 200 will be received in August. Required For the three months ending 30 September prepare the following budgets, showing monthly details where appropriate. Calculations may be rounded to the nearest dollar. (a) Sales budget. (b) Purchases budget. (c) Cost of goods sold budget. (d) Marketing expenses budget. (e) Administration expenses budget. (f) Financial expenses budget. (g Budgeted Income statement, In summary format.

Explanation / Answer

Sales Budget July August September Total Unit Sales 8330 7980 8400 24710 Unit selling price 17 17 17 17 Budgeted Sales 141610 135660 142800 420070 Schedule of cash collections July August September Total May Sales 23871 23871 June Sales 141110 24478 165589 July Sales 111022 24074 135096 August Sales 106357 106357 Total Collections 164982 135501 130431 430913 Purchase budget July August September Total Budgeted sales - units 8330 7980 8400 24710 Add: Desired ending inventory 7980 8400 8540 8540            (Next month's sales) Total units needed 16310 16380 16940 33250 Less: Beginning inventory 8330 7980 8400 8330 Budgeted purchases - units 7980 8400 8540 24920 Cost of goods sold budget July August September Total Budgeted sales - units 8330 7980 8400 24710 Cost per unit ($) 11 11 11 11 Cost of goods sold 91630 87780 92400 271810 Marketing expenses budget July August September Total Variable marketing expenses (7% of sales) 9913 9496 9996 29405 Fixed marketing expenses - Depreciation 800 800 800 2400 Budgeted total marketing expenses 10713 10296 10796 31805 Administrative expenses budget July August September Total Variable administrative expenses (6.5% of sales) 9205 8818 9282 27305 Fixed administrative expenses - Depreciation 350 350 350 1050 Budgeted total administrative expenses 9555 9168 9632 28355 Financial expenses budget July August September Total Variable financial expenses (1.5% of sales) 2124 2035 2142 6301 Fixed financial expenses - Bad debts 4248 4070 4284 12602 Budgeted total financial expenses 6372 6105 6426 18903 Budgeted Income statement for the quarter ending September 30 Sales 420070 Less: Sales discounts 6721 Net sales 413349 Less: Expenses cost of goods sold 271810 Selling expenses 31805 Administrative Expenses 28355 Financial expenses 18903 Total expenses 350873 Net income 62476

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