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Cash Budget The Williams Supply Company sells for $50 one product that it purchases for $20. Budgeted sales in total dollars for the year
Cash Budget The Williams Supply Company sells for $50 one product that it purchases for $20. Budgeted sales in total dollars for the year are $3,000,000. The sales information needed for preparing the July budget follows: Month Sales Revenue May $ 175,000 240,000 June July 295,000 August 320,000 Account balances at July 1 include these: Cash $125,000 Merchandise inventory 47,200 Accounts receivable (sales) Accounts payable (purchases) 84,530 47,200 The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 40% of the budgeted sales in units for the next month. A 2% cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 60% of the billings will be collected during the month of sale, 25% in the following month, 12% in the second following month, and 3% will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $1,200,000, of which three-fourths is fixed expense (inclusive of a $36,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred.
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