The following information pertains to the January operating budget for Ken’s Cor

ID: 2421313 • Letter: T

Question

The following information pertains to the January operating budget for Ken’s Corporation.

Budgeted sales for January $200,000 and February $100,000.

Collections for sales are 60% in the month of sale and 40% the next month.

Gross margin is 30% of sales.

Administrative costs are $10,000 each month.

Beginning accounts receivable is $20,000.

Beginning inventory is $14,000.

Beginning accounts payable is $65,000. (All from inventory purchases.)

Purchases are paid in full the following month.

Desired ending inventory is 20% of next month's cost of goods sold (COGS).

A) For January, budgeted cash collections are ________.

B) At the end of January, budgeted accounts receivable is ________.

C) For January, budgeted cost of goods sold is ________ .

D) For January, budgeted net income is ________.

E) At the end of January, budgeted ending inventory is ________.

A) Budgeted CAsh collection

January = 200000x60% = $120000 + Beginning Accounts Recevable

= 120000+20000 = $140000

B) Budgeted Accounts Receivable at the end of JAnuary

= 200000 x 40% = $80000

C) Budgeted Cost of goods sold for JAnuary

Gross Margin = 30%

Cost of Goods SOld = 70% of sales

Sales = 200000

COGS = 200000x70% = $140000

D) FOr JAnuary , Budgeted Net Income

= Sales - COGS - Administrative Expense

= 200000-140000-10000 = $50000

E) Budgeted Ending Inventory =20% of the next monh's COGS

=100000x70%x20% =$14000

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