Problem D Galaxy Lighting Company manufactures and sells lighting fixtures. Esti

Question

Problem D Galaxy Lighting Company manufactures and sells lighting fixtures. Estimated sales for the next three months are: September S 350,000 October S 500,000 November S 400,000 Sales for August were $400,000 and December is estimated as $420,000. All sales are on account. Galaxy Lighting Company estimates that 80% of the accounts receivable are collected in the month of sale with the remaining 20% collected the following month. The units sell for $40 each. Generally, 60% of purchases are due and payable in the month of purchase with the remainder due the following month. Purchase cost per unit for materials is $18. The company maintains an end-of-the-month inventory of 1,000 units plus 10% of next month's unit sales. August's ending inventory is estimated at 1,875 units and November's ending inventory is estimated as 2,500 units. The accounts payable balance on August 31 is expected to be $13,500 and should be paid in September. 1. Prepare a sales budget in dollars and units for September, October, and November. 2. Prepare a schedule of cash receipts from customers 3. Prepare a purchases budget for September, October and November. 4. Prepare a schedule of cash payments for purchases

Explanation / Answer

SALES BUDGET Sep Oct Nov Budgeted Sales units 8,750 12,500 10,000 Selling price per unit 40 40 40 Total Sales 350,000 500,000 400,000 EXPECTED CASH COLLECTIONS Sep Oct Nov August month sales 80,000 Sep month sales 280,000 70000 Oct month sales 400000 100000 Nov month sales 320000 Total Cash Collections 360,000 470,000 420,000 RAW MATERIAL PURCHASE BUDGET Sep Oct Nov Budgeted Sales units 8,750 12,500 10,000 Add: Desired Ending Inventory 2,250 2,000 2,500 Total needs 11,000 14,500 12,500 Less: Beginning Inventory 1,875 2,250 2,000 Purchase Units 9,125 12,250 10,500 Cost price per unit 18.00 18.00 18.00 Budgeted Purchase in $ 164,250 220,500 189,000 EXPECTED CASH PAYMENTS Sep Oct Nov Beginning Accounts payable 13,500 Sep Month purchases 98550 65700 Oct month purchases 132300 88200 Nov month purchases 113400 Total Cash disbursement 112,050 198,000 201,600

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