Case Study:

Question 2: Prepare a Purchases (direct material) Budget and Schedule of Cash Disbursements for purchases of Direct Materials.

DC's Projected Revenues & Expenses September October November 91,569 56,773 34,796 21,000 13,796 June Ju August Sales Cost of Goods Sold Gross Profit Admin & Selling Costs Net Income before Taxes 85,000 52,700 32,300 21,000 11,300 86,275 53,491 32,785 21,000 11,785 87,569 54,293 33,276 21,000 12,276 88,883 55,107 33,775 21,000 12,775 90,216 55,934 34,282 21,000 13,282 Other Information: DC's operates on a calendar year basis Credit Sales from Events and Catering are 20% per month Collections are 60% in the month of sale and 40% in the following month Admin & Selling includes $1,000 depreciation expense Prime (direct) wages are 30% of Sales Admin & Sales salaries are $4,350 per month wages are paid 80% in current month and 20% the following month Purchases of Direct Materials, which are 32% of Sales, are paid 50% in current month and 50% in following month Loan payment of $1,600 is made at the 1st of each month A dividend to the owners of 10% of the ending quarter's Net Income is paid in Jan, Apr, Jul, Oct April - June Net Income before taxes was $50,000 Ending inventory needs to be 30% of the following month's Direct Materials Cost of Goods Sold Accounts payable for purchases June 30 was $13,600 Beginning Cash Balance June 30 was $175,000 Effective tax rate is 23%. Quarterly estimated taxes are paid the month following the end of the quarter