7. Cash Budget The Williams Supply Company sells for $40 one product that it pur

Question

7. Cash Budget The Williams Supply Company sells for $40 one product that it purchases for $25. Budgeted sales in total dollars for the year are $1,400,000. The sales information needed for preparing the July budget follows Month May. July Sales Revenue $34,000 48,000 56,000 64,000 Account balances at July 1 include these: Cash. .. $24,000 The company pays for one-half of its purchases in the month of purchase and the remainder in the fol- lowing month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Ex- perience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 8 percent in the second following month, and 2 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $210,000, of which one-half is fixed expense (inclusive of a $21,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred. Required a. Prepare a schedule of estimated cash collections for July b. Prepare a schedule of estimated July cash payments for purchases. c. Prepare schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements. d. Prepare a cash budget in summary form for July.

Explanation / Answer

a

Schedule of estimated cash collections in July

Sales

May

34000*8%

2720

June

48000*40%

19200

July

56000*50%

28000

Total sales

49920

B. schedule of payments for the month of July

May

June

July

August

sales revenue

34000

48000

56000

64000

Selling price

40

40

40

40

Number of units sold

850

1200

1400

1600

Number of units Purchased in the month of June

Units sold in the month of June

1200

Add: Ending units: 1400*50%

700

less: Opening units:1200*50%

-600

1300

Unit price

$25

Cost of goods sold

$32,500

Payments made during the month of july

$16,250

Number of units Purchased in the month of july

Units sold in the month of july

1400

Add: Ending units 1600*50%

800

Less: beginning units 1400*50%

-700

1500

Unit price

$25

cost of goods sold

$37,500

Payments made during the month

$37500*50%

$18,750

c.

c

Schedule of selling and administrative expense

working

$

Variable

210000*0.5

105000

Fixed

Depreciation

21000

Other selling and admin

84000

Variable cost for the month of July

105000*56000/1400,000

4200

Fixed cost for the month of July

84000/12

7000

11200

d

d

$

$

cash budget

cash in the beginning

24000

collections from sales

49920

Payment made for purchases

($35,000)

Payment of selling and admin

Variable

-4200

Fixed

-7000

-46200

Total cash collection for july

27720

a

Schedule of estimated cash collections in July

Sales

May

34000*8%

2720

June

48000*40%

19200

July

56000*50%

28000

Total sales

49920

Related Questions

Navigate

• Browse (All)
• Browse 7
• Subjects

---

---

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