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Chapter 22: Q22E (page 1233)

Preparing an operating budget—sales budget

Yarbrough Company manufactures T-shirts printed with tourist destination logos. The following table shows sales prices and projected sales volume for the summer months:

Projected Sales in Units T-Shirt Sizes Sales Price June July August Youth $ 7 575 500 525 Adult—regular 17 625 900 825 Adult—oversized 18 400 500 475 Prepare a sales budget for Yarbrough Company for the three months.

Short Answer

Expert verified

Answer

The budgeted sales revenue for the June, July, and August are $21,850, $27,800, and $26,250.

Step by step solution

01

Meaning of sales budget

A sales budget estimates the amount of sales revenue.

02

Preparation of sales budget


June

July

August

Youth

$4,025

$3,500

$3,675

Adult- regular

$10,625

$15,300

$14,025

Adult- oversized

$7,200

$9,000

$8,550

Total

$21,850

$27,800

$26,250

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Most popular questions from this chapter

Preparing a financial budget—schedule of cash receipts, schedule of cash payments, cash budget

Haney Company has provided the following budget information for the first quarter of 2018:

Total sales \(214,000 Budgeted purchases of direct materials 40,300 Budgeted direct labor cost 37,200 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 1,150 Depreciation 1,200 Insurance and property taxes 6,600 Budgeted selling and administrative expenses: Salaries expense 13,000 Rent expense 2,500 Insurance expense 1,100 Depreciation expense 350 Supplies expense 4,280 Additional data related to the first quarter of 2018 for Haney Company:

a. Capital expenditures include \)38,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

b. Cash receipts are 65% of sales in the quarter of the sale and 35% in the quarter following the sale.

c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

e. Income tax expense for the first quarter is projected at \(44,000 and is paid in the quarter incurred.

f. Haney Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.

g. The December 31, 2017, balance in Cash is \)45,000, in Accounts Receivable is \(23,200, and in Accounts Payable is \)9,000.

Requirements

1. Prepare Haney Company’s schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.

2. Prepare Haney Company’s cash budget for the first quarter of 2018.

Preparing a financial budget—budgeted income statement and balance sheet Ball Company has the following post-closing trial balance on December 31, 2018:

The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales, all on account $ 121,800 Budgeted purchases of merchandise inventory, all on account 60,400 Budgeted cost of goods sold 60,900 Budgeted selling and administrative expenses:

Commissions expense 6,090 Salaries expense 7,000 Rent expense 4,100 Depreciation expense 600 Insurance expense 400 Budgeted cash receipts from customers 125,840 Budgeted cash payments for merchandise inventory 67,775 Budgeted cash payments for salaries and commissions 14,822 Budgeted income tax expense 5,400 Additional information: Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

Requirements

  1. Prepare a budgeted income statement for the quarter ended March 31, 2019.
  2. 2. Prepare a budgeted balance sheet as of March 31, 2019.

Using sensitivity analysis in budgeting

Refer to the Victors schedule of cash receipts from customers that you prepared in Short Exercise S22-15. Now assume that Victors’s sales are collected as follows:

40% in the month of the sale

20% in the month after the sale

39% two months after the sale

1% never collected

Prepare a revised schedule of cash receipts for January and February

Question: Preparing a financial budget—schedule of cash receipts, schedule of cash payments, cash budget

Puckett Company has provided the following budget information for the first quarter of 2018:

Total sales \( 216,000

Budgeted purchases of direct materials 40,600

Budgeted direct labor cost 36,800 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 1,025

Depreciation 1,000

Insurance and property taxes 6,650

Budgeted selling and administrative expenses:

Salaries expense 14,000

Rent expense 2,500

Insurance expense 2,000

Depreciation expense 350

Supplies expense 4,320

Additional data related to the first quarter of 2018 for Puckett Company:

a. Capital expenditures include \)41,000 for new manufacturing equipment to be purchased and paid in the first quarter.

b. Cash receipts are 75% of sales in the quarter of the sale and 25% in the quarter following the sale.

c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

e. Income tax expense for the first quarter is projected at \(49,000 and is paid in the quarter incurred.

f. Puckett Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.

g. The December 31, 2017, balance in Cash is \)25,000, in Accounts Receivable is \(21,600, and in Accounts Payable is \)16,500.

Requirements

1. Prepare Puckett Company’s schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.

2. Prepare Puckett Company’s cash budget for the first quarter of 2018.

What are the two types of manufacturing overhead? How do they affect the manufacturing overhead budget calculations?
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