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Chapter 22: Q3TI (page 1198)

11. Kendall Company projects 2019 first quarter sales to be $10,000 and increase by 5% per quarter. Determine the projected sales for 2019 by quarter and in total. Round answers to the nearest dollar.

12. Friedman Company manufactures and sells bicycles. A popular model is the XC. The company expects to sell 1,500 XCs in 2018 and 1,800 XCs in 2019. At the beginning of 2018, Friedman has 350 XCs in Finished Goods Inventory and desires to have 10% of the next year’s sales available at the end of the year. How many XCs will Friedman need to produce in 2018?

Short Answer

Expert verified

11. The total sales for the yearare$43,101.25

12. The budgeted XC’s to be producedare1,330 Units.

Step by step solution

01

Meaning of Budget  

The term budget refers to estimating the activities to be performed in the future for better growth. The budget can be related to how many units we will sell in the future and the costs. It gives us a goal to achieve effectively and efficiently.

02

Calculation of projected sales for 2019 by quarter and in total

Particulars

Amount ($)

Sales of quarter 1

$10,000

Sales of quarter 2($10,000+5%)

10,500

Sales of quarter 3($10,500+5%)

11,025

Sales of quarter 4($11,025+5%)

11,576.25

Total Sales

$43,101.25

03

Preparation of production budget

Particulars

2018 (Units)

Budgeted XC’s to be sold

1,500

Add: Desired XC’s in ending inventory (1800×10%)

180

Total XC’s needed

1,680

Less: XC’s in beginning inventory

(350)

Budgeted XC’s to be produced

1,330

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Most popular questions from this chapter

Preparing an operating budget—sales budget; inventory, purchases and COGS budget; and S&A expense budget Ballard Office Supply’s March 31, 2018, balance sheet follows:

The budget committee of Ballard Office Supply has assembled the following data.

a. Sales in April are expected to be \(160,000. Ballard forecasts that monthly sales will increase 2% over April sales in May. June’s sales will increase by 4% over April sales. July sales will increase 20% over April sales.

b. Ballard maintains inventory of \)7,000 plus 25% of the cost of goods sold budgeted for the following month. Cost of goods sold equal 50% of sales revenue.

c. Monthly salaries amount to \(3,000. Sales commissions equal 5% of sales for that month.

d. Other monthly expenses are as follows: • Rent: \)3,400 • Depreciation: \(800 • Insurance: \)300 • Income tax: $1,500

Requirements

1. Prepare Ballard’s sales budget for April and May 2018. Round all calculations to the nearest dollar.

2. Prepare Ballard’s inventory, purchases, and cost of goods sold budget for April and May.

3. Prepare Ballard’s selling and administrative expense budget for April and May.

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.

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.

Preparing a financial budget—cash budget, sensitivity analysis

Leichter Auto Parts, a family-owned auto parts store, began January with \(10,500 cash. Management forecasts that collections from credit customers will be \)11,000 in January and \(15,200 in February. The store is scheduled to receive \)8,500 cash on a business note receivable in January. Projected cash payments include inventory purchases (\(15,600 in January and \)14,800 in February) and selling and administrative expenses (\(2,900 each month).

Leichter Auto Part'sbank requires a \)10,000 minimum balance in the store’s checking account. At the end of any month when the account balance falls below \(10,000, the bank automatically extends credit to the store in multiples of \)1,000. Leichter Auto Parts borrows as little as possible and pays back loans in quarterly installments of \(2,000, plus 4% APR interest on the entire unpaid principal. The first payment occurs three months after the loan.

Requirements

1. Prepare Leichter Auto Part'scash budget for January and February.

2. How much cash will Leichter Auto Parts borrow in February if collections from customers that month total \)14,200 instead of $15,200?
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