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Chapter 22: Q20SE (page 1232)
Using sensitivity analysis in budgeting Riverbed Sporting Goods Store has the following sales budget:
Suppose June sales are expected to be \(81,000 rather than \)65,000. Revise Riverbed’s sales budget.
Answer
The cash sales for June are $60,750 and credit sales are $20,250.
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Preparing an operating budget—inventory, purchases, and cost of goods sold budget
Slate, Inc. sells tire rims. Its sales budget for the nine months ended September 30, 2018, follows:
Quarter Ended Nine-MonthTotal
March 31 June 30 September 30 Cash sales, 20% \( 28,000 \) 38,000 \( 33,000 \) 99,000
Credit sales, 80% 112,000 152,000 132,000 396,000 Total sales \( 140,000 \) 190,000 \( 165,000 \) 495,000
In the past, cost of goods sold has been 40% of total sales. The director of marketing and the financial vice president agree that each quarter’s ending inventory should not be below \(5,000 plus 10% of cost of goods sold for the following quarter. The marketing director expects sales of \)240,000 during the fourth quarter. The January 1 inventory was $38,000. Prepare an inventory, purchases, and cost of goods sold budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period.
How is benchmarking beneficial?
In a manufacturing company, what are the three types of budgets included in the master budget? Describe each type.
Preparing an operating budget—cost of goods sold budget Butler Company expects to sell 1,650 units in January and 1,550 units in February. The company expects to incur the following product costs:
Direct materials cost per unit \( 85
Direct labor cost per unit 60
Manufacturing overhead cost per unit 55
The beginning balance in Finished Goods Inventory is 250 units at \)200 each for a total of $50,000. Butler uses FIFO inventory costing method. Prepare the cost of goods sold budget for Butler for January and February.
Preparing an operating budget—selling and administrative expense budget
Consider the sales budget presented in Exercise E22-31. Slate’s selling and administrative expenses include the following:
Rent, \(2,000 per month
Salaries, \)4,000 per month
Commissions, 5% of sales
Depreciation, $1,000 per month
Miscellaneous expenses, 2% of sales
Prepare a selling and administrative expense budget for each of the three quarters of 2018 and totals for the nine-month period.
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