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Chapter 22: Q51PGB (page 1256)

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.

Short Answer

Expert verified
  1. Total sales is$323,200
  2. Budgeted purchases are $162,400
  3. Selling and administrative expense $34,000

Step by step solution

01

Preparation of sales budget

BALLARD OFFICE SUPPLY

Sales Budget

For the first quarter, 2019

April

May

Total

Total budgeted sales

$160,000

$163,200

$323,200

02

Preparation of production budget

BALLARD OFFICE SUPPLY

Inventory, Purchase, and Cost of goods sold Budget

For the first quarter, 2019

April

May

Total

Cost of goods sold

$80,000

$81,600

$161,600

Plus: Desired ending inventory

$27,400

$27,800

$55,200

Total merchandise inventory required

$107,400

$109,400

$216,800

Less: Beginning merchandise inventory

$27,000

$27,400

$54,400

Budgeted purchases

$80,400

$82,000

$162,400

03

Preparation of selling and administrative expense budget 

BALLARD OFFICE SUPPLY

Selling and Administrative Expense Budget

For the first quarter, 2019

April

May

Total

Variable expenses:

Commission (5% of Sales)

$8,000

$8,160

$16,160

Fixed Expenses:

Salaries

$3,000

$3,000

$6,000

Rent

$3,400

$3,400

$6,800

Depreciation

$800

$800

$1,600

Insurance

$300

$300

$600

Income Tax

$1,500

$1,500

$3,000

Total

$17,000

$17,000

$34,000

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Most popular questions from this chapter

Preparing the financial budget—budgeted balance sheet

Barker, Inc. has the following balance sheet at December 31, 2018:

Barker projects the following transactions for 2019:

Sales on account, \(20,000

Cash receipts from customers from sales on account, \)17,600

Purchase of raw materials on account, \(7,000

Payments on account, \)3,500

Total cost of completed products, \(16,600, which includes the following:

Raw materials used, \)7,100

Direct labor costs incurred and paid, \(3,900

Manufacturing overhead costs incurred and paid, \)4,800

Depreciation on manufacturing equipment, \(800

Cost of goods sold, \)14,800

Selling and administrative costs incurred and paid, \(500

Purchase of equipment, paid in 2019, \)2,000

Prepare a budgeted balance sheet for Barker, Inc. for December 31, 2019. (Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)

Preparing a financial budget—schedule of cash receipts

Berry expects total sales of \(359,000 in January and \)405,000 in February. Assume that Berry’s sales are collected as follows:

80% in the month of the sale

10% in the month after the sale

6% two months after the sales

4% never collected

November sales totaled \(350,000, and December sales were \)325,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

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

Beasley Company’s budget committee provides the following information:

December 31, 2017, account balances:

Cash \( 32,000 Accounts Receivable 19,000 Merchandise Inventory 16,000 Accounts Payable 15,000 Salaries and Commissions Payable 2,900 Budgeted amounts for 2018:

January February Sales, all on account \) 84,000 $ 84,400 Purchases, all on account 41,000 41,600 Commissions Expense 4,200 4,220 Salaries Expense 5,000 5,000 Rent Expense 2,200 2,200 Depreciation Expense 500 500 Insurance Expense 200 200 Income Tax Expense 1,900 1,900

Requirements

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 70% in the month of purchase and 30% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expense for January and February 2018. Assume 25% of the accrual for Salaries and Commissions Payable is for commissions and 75% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 70% in the month incurred and 30% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February. Assume no financing took place.

Preparing a financial budget—schedule of cash payments

Jefferson Company has budgeted purchases of merchandise inventory of \(457,500 in January and \)533,250 in February. Assume Jefferson pays for inventory purchases 70% in the month of purchase and 30% in the month after purchase. The Accounts Payable balance on December 31 is $98,275. Prepare a schedule of cash payments for purchases for January and February.

Preparing a financial budget—schedule of cash payments

Marcel Company has the following projected costs for manufacturing and selling and administrative expenses:

January February March Direct materials purchases \( 3,100 \) 3,500 $ 4,800 Direct labor costs 3,300 3,500 3,600 Depreciation on plant 550 550 550 Utilities for plant 650 650 650 Property taxes on plant 200 200 200 Depreciation on office 550 550 550 Utilities for office 250 250 250 Property taxes on office 170 170 170 Office salaries 3,500 3,500 3,500

All costs are paid in month incurred except: direct materials, which are paid in the month following the purchase; utilities, which are paid in the month after incurred; and property taxes, which are prepaid for the year on January 2. The Accounts Payable and Utilities Payable accounts have a zero balance on January 1. Prepare a schedule of cash payments for Marcel for January, February, and March. Determine the balances in Prepaid Property Taxes, Accounts Payable, and Utilities Payable as of March 31.
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