You have just been hired to work for a company that sells coffee mugs, Beans My
ID: 2406022 • Letter: Y
Question
You have just been hired to work for a company that sells coffee mugs, Beans My Way, Inc. The company has an exclusive franchise on the distribution of the coffee mugs, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorable impression on the president and have assembled the information below The coffee mugs are sold to retailers for $14 each. Recent and forecasted sales in units are as follows: January (actual) February (actual March (actual) April (budget) May (budget) June (budget) July (budget) August (budget) September (budget) 22,400 28,400 42,400 67 400 102.400 52.400 32.400 30,400 27400 The large buildup in sales before and during June is due to Father's Day, Ending inventories are supposed to equal 40% of the next month's sales in units. The coffee mugs cost the company S5.20 each. or as month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month's sales are collected by month-end. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month f llowing sale Bad debts have been negligible
Explanation / Answer
My Way Inc. Sales Budget Months April May June Quarter Budgeted unit sales 67400 102400 52400 222200 Selling Price Per unit $ 14.00 $ 14.00 $ 14.00 $ 14.00 Total sales $ 9,43,600.00 $ 14,33,600.00 $ 7,33,600.00 $ 31,10,800.00 Schedule of expected cash collections Months Sales April May June Quarter February sales($45440) $ 45,440.00 $ 45,440.00 March Sales($678400*70%) in April,($678400*10%) in May $ 6,78,400.00 $ 4,74,880.00 $ 67,840.00 $ 5,42,720.00 April sales($943600*20%) in April,($943600*70%) in May,($943600*10%) in June $ 9,43,600.00 $ 1,88,720.00 $ 6,60,520.00 $ 94,360.00 $ 9,43,600.00 May sales($1433600*20%) in May,($1433600*70%) in June $ 14,33,600.00 $ 2,86,720.00 $ 10,03,520.00 $ 12,90,240.00 June Sales($733600*20%) in June $ 7,33,600.00 $ 1,46,720.00 $ 1,46,720.00 Total Cash collections $ 37,89,200.00 $ 7,09,040.00 $ 10,15,080.00 $ 12,44,600.00 $ 29,68,720.00 March Sales 542720*100/80 Mercendise Purchase Budget April May June Quarter Budgeted Unit Sales(A) 67400 102400 52400 222200 Add:Ending Inventory(B) 40960 20960 12960 12960 Total Needs(C )=(A)+(B) 108360 123360 65360 235160 Less: Opening Inventory=(D) 26960 40960 20960 26960 Required Purchases(E )=(C )-(D) 81400 82400 44400 208200 Cost of Purchase Per Unit=(F) $ 5.20 $ 5.20 $ 5.20 $ 5.20 Total Cost of Purchase=(E )*(F ) $ 4,23,280.00 $ 4,28,480.00 $ 2,30,880.00 $ 10,82,640.00 June Ending Inventory=July Sales*40%=(32400*40%) April Beginning Inventory=April Sales*40%=(67400*40%) Budgeted Cash disbursement of Mercendise Purchase Months April May June Quarter Accounts Payable $ 1,12,000.00 $ 1,12,000.00 April Purchases($423280*50%) in April,($423280*50%) in May $ 2,11,640.00 $ 2,11,640.00 $ 4,23,280.00 May Purchases($428480*50%) in May,($428480*50%) in June $ 2,14,240.00 $ 2,14,240.00 $ 4,28,480.00 June Purchases($230880*50%) in June $ 1,15,440.00 $ 1,15,440.00 Total Cash Payments $ 3,23,640.00 $ 4,25,880.00 $ 3,29,680.00 $ 10,79,200.00 MY Way Inc. For the three months ending June 30th Months April May June Quarter Cash Balance $ 86,000.00 $ 1,27,656.00 $ 1,44,512.00 $ 86,000.00 Add: Collections from customer $ 7,09,040.00 $ 10,15,080.00 $ 12,44,600.00 $ 29,68,720.00 Total Cash available $ 7,95,040.00 $ 11,42,736.00 $ 13,89,112.00 $ 30,54,720.00 Less: Disbursement Mercendise Purchase $ 3,23,640.00 $ 4,25,880.00 $ 3,29,680.00 $ 10,79,200.00 Advertisement $ 3,20,000.00 $ 3,20,000.00 $ 3,20,000.00 $ 9,60,000.00 Rent $ 30,000.00 $ 30,000.00 $ 30,000.00 $ 90,000.00 Salaries $ 1,30,000.00 $ 1,30,000.00 $ 1,30,000.00 $ 3,90,000.00 Commissions(Sales*4%) $ 37,744.00 $ 57,344.00 $ 29,344.00 $ 1,24,432.00 Utilities $ 13,000.00 $ 13,000.00 $ 13,000.00 $ 39,000.00 Equipment Purchase $ 22,000.00 $ 52,000.00 $ 74,000.00 Dividend Paid $ 24,000.00 $ 24,000.00 Total Disbursemnts $ 8,78,384.00 $ 9,98,224.00 $ 9,04,024.00 $ 27,80,632.00 Excess/Deficiency of receipts over $ (83,344.00) $ 1,44,512.00 $ 4,85,088.00 $ 2,74,088.00 disbursements Financing: Borrowings $ 2,11,000.00 $ 2,11,000.00 Repayments $ (2,11,000.00) $ (2,11,000.00) Interest=($211000*1%*3) $ (6,330.00) $ (6,330.00) Total Financing $ 2,11,000.00 $ - $ (2,17,330.00) $ (6,330.00) Cash Balance ,ending $ 1,27,656.00 $ 1,44,512.00 $ 2,67,758.00 $ 2,67,758.00 My Way Inc. Budgeted Income Statement For the three months ended June 30th Sales $ 31,10,800.00 $ 31,10,800.00 Variable Expenes Cost of goods sold($140192+$1082640-($12960*$5.20) $ 11,55,440.00 Commission $ 1,24,432.00 $ 12,79,872.00 Contribution Margin $ 18,30,928.00 Fixed Expenses Advertising $ 9,60,000.00 Rent $ 90,000.00 Salaries $ 3,90,000.00 Utilities $ 39,000.00 Insurance($4200*3) $ 12,600.00 Depreciation($26000*3) $ 78,000.00 $ 15,69,600.00 Net Operating Income $ 2,61,328.00 Interest Expense $ (6,330.00) Net Income $ 2,54,998.00 Cost of goods sold=Opening Stock+Purchases-Closing Stock MY Way Inc. Budgeted Balance Sheet June 30th Assets Cash $ 2,67,758.00 Accounts Receivable(As per below working) $ 7,30,240.00 Inventory $ 67,392.00 Prepaid insurance $ 14,400.00 Property & Equipment ,net $ 10,66,000.00 Total Assets $ 21,45,790.00 Liabilities and stockholder's equity Accounts Payable $ 1,15,440.00 Dividend Payable $ 24,000.00 Common Stock $ 10,40,000.00 Retained Earning(As per below working) $ 9,66,350.00 Total Liabilities and stockholder's equity $ 21,45,790.00 Accounts Receivable May sales $ 1,43,360.00 June sales $ 5,86,880.00 Total $ 7,30,240.00 Retained Earnings at june 30th Balance ,March 31st $ 7,35,352.00 Add: Net Income $ 2,54,998.00 Total $ 9,90,350.00 Less: Dividend declared $ 24,000.00 Balance on June 30th $ 9,66,350.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.