Data Scenario:
You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has not been a priority of the company and that they have been experiencing cash shortages. You have contacted various areas on the organization and have accumulated the information below to assist you in preparing a comprehensive budget.
The following is actual information that relates to the operations of a merchandiser named Sled Company, a wholesaler of sleds as of March 31.
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Cash
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$700
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Accounts receivable
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14,060
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Inventory
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22,960
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Accounts Payable
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16,682
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Actual and Budgeted sales dollar Data-Sales Budget:
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March (actual)
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$38,000
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April
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$41,000
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May
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$42,000
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June
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$40,000
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July
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$43,000
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Sales are the following type: 63% Cash sales collected in month of sale and 37% Credit sales collected in the following month of sale
Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.
Cost of goods sold equals 80% of sales price.
At the end of each month, inventory is to be on hand(ending inventory) equal to 70% of following month's sales needs, stated at cost. Therefore, inventory on hand on March 31st is April's sales*.8*.7.
Inventory purchases are paid 48% in month of purchase and 52% in month after purchase
The accounts payable at March 31 is a result of March purchases of inventory. I have set up a calculation on the budget worksheet to show you this calculation.
Monthly selling, general administrative expenses are as follows and are paid in the month incurred if it is a cash expense.
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Salaries and wages
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10%of sales dollar
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Rent
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$2,000per month
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Other cash expenses
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2% of sales dollar
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Advertising
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$1,000per month
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Depreciation
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$900for month
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Required: Prepare the following budgets on the budget worksheet, which contains a template of budgets you should use.
I have adapted the budget model to meet the needs of this company, and this project is showing monthly and a quarter budget.
1. Prepare a Cash Receipts Budget for the quarter ending June 30th, by month and quarter.
You do not need a formal sales budget since the sales budget is above in the data.
2. Prepare a merchandise purchase budget by month and quarter. A merchandiser purchases in dollars.
I have set up a formatted budget for you. You can see how I have made a few minor changes to Schedule A on page 373, which is a production budget which we are not preparing.
Make sure you think about the numbers you use in the quarter column. I am specifically talking about how you handle beginning and ending inventory, since for the quarter the beginning inventory should be the beginning inventory for the quarter.
3. Prepare a Selling and Administrative Expense Budget, by month and quarter.
My budget is a little bit different than the one in the text, because the expenses are more detailed in my budget analysis.
4. Prepare a cash disbursements budget, by month and quarter.
5. Prepare a cash budget showing the months and quarter.
Use the format I have provided on the budget sheet.
6. Based on the quarterly cash budget you prepared, do you have any recommendations on cash management. Discuss the type of business and the cash flow problems a company in this industry might have.
Type your answer on the budget worksheet , where I have set out the question.
7. Prepare a budgeted income statement for the quarter ending June 30, 20XX. You do not need to show monthly columns.
8. What do you think about the survivability of this business?
9. What if the company finds out the monthly rent will increase to $2,500, what budgets are effected? Why?
What is the New Net income(Loss) for the quarter?
If you have linked everything correctly, you should only have to change the monthly rent on this sheet to determine your answer to the questions asked. Please change the rent back to the original amount of 2,000 before you submit.
Attachment:- Assignment.rar