Our company sells noserings. Please prepare a master budget for the three-month

Question

Our company sells noserings. Please prepare a master budget for the three-month period ending June 30. Include the following detailed budgets (by month and in total) Sales budget o Schedule of expected cash collections from sales Purchases budget (in units and in dollars) o Expected cash disbursements for merchandise purchases Sales price of product $10/unit Actual Sales are as follows: o January $20,000 o February $26,000 o March $40,000 Budgeted sales: o September $25,000 o August $28,000 o July $30,000 o June $50,000 o May $100,000 o April $65,000 . we maintain enough inventory on hand to cover 40% of the next month's sales. . we pay suppliers $4/unit. we pay our supplier 50% of what we purchase in the month of the purchase and 50% in the following month. With regard to sales to customers (all sales are on credit), cash from sales is collected as follows: o 20% in the month of the sale o 70% in the month following the sale 10% in the second month following the sale . Costs: o Sales commissions is 4%. o Fixed costs: 1) Advertising $14,000, 2) Rent $3,000, 3) Salaries $106,000, 4) Utilities $200,000, 5) Rent $18,000, 6) Insurance $7,000.

Explanation / Answer

Master budget for the three-month period ending June Sales Budget April May June Total Sales in Dollars               65,000           1,00,000               50,000        2,15,000 Sales price per unit                       10 10 10 10 Sales in Units                 6,500               10,000                 5,000            21,500 Shedule of expected cash collections from sales April May June Total Cash collection from Feburary sales                 2,600 -   -                2,600 (26000*10%) Cash collection from March sales               28,000                 4,000 -              32,000 (40000*70%) (40000*10%) Cash collection from April sales               13,000               45,500                 6,500            65,000 (65000*20%) (65000*70%) (65000*10%) Cash collection from May sales                        -                 20,000               70,000            90,000 (100000*20%) (100000*70%) Cash collection from June sales                        -   -                 10,000            10,000 (50000*20%) Total Cash collections               43,600               69,500               86,500        1,99,600 Purchases budget (in units and in dollars) April May June Total Sales in Units                 6,500               10,000                 5,000            21,500 Add: Required Ending Inventory                 4,000                 2,000                 1,200 (10000X40%) (5000X40%) (3000X40%) Total Inventory required               10,500               12,000                 6,200            28,700 Less :Beginning Inventory                 2,600                 4,000                 2,000 (6500X40%) (10000X40%) (5000X40%) Budgeted Purchases in Units                 7,900                 8,000                 4,200            20,100 Purchase rate per unit                          4 4 4 4 Budgeted Purchases in Dollars               31,600               32,000               16,800            80,400 Expected cash disbursements for merchandise purchases April May June Total Cash disbursements for March Purchases               16,400            16,400 (32800*50%) Cash disbursements for April Purchases               15,800               15,800            31,600 (31,600*50%) (31,600*50%) Cash disbursements for May Purchases               16,000               16,000            32,000 (32000*50%) (32000*50%) Cash disbursements for June Purchases                 8,400              8,400 (16800*50%) Total Cash disbursements               32,200               31,800               24,400            88,400 Note : March Purchases = March sales +Ending inventory-Beginning Innvetory = (4000+2600+(4000X40%) = 8200 units March purchases in Dollars = 8200 x $4 = $32,800

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