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Chapter 22: Q8RQ (page 1228)
In a manufacturing company, what are the three types of budgets included in the master budget? Describe each type.
The master budget includes the operating, capital, andfinancial budgets.
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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.
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
Explain the difference between strategic and operational budgets
Preparing a financial budget—budgeted balance sheet
Use the following June actual ending balances and July 31, 2018, budgeted amounts for Omas to prepare a budgeted balance sheet for July 31, 2018.
a. June 30 Merchandise Inventory balance, \(17,770
b. July purchase of Merchandise Inventory, \)4,400, paid in cash
c. July payments of Accounts Payable, \(8,400
d. June 30 Accounts Payable balance, \)10,700
e. June 30 Furniture and Fixtures balance, \(34,100; Accumulated Depreciation balance, \)29,880
f. June 30 total stockholders’ equity balance, \(28,020
g. July Depreciation Expense, \)500
h. Cost of Goods Sold, 60% of sales
i. Other July expenses, including income tax, \(2,000, paid in cash
j. June 30 Cash balance, \)11,600
k. July budgeted sales, all on account, \(12,600
l. June 30 Accounts Receivable balance, \)5,130
m. July cash receipts from collections on account, $14,700
(Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)
Explain the difference between static and flexible budgets.
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