Chapter $7$: Budgeting

Information for Comprehensive Example

Furniture firm CQ wants to plan a budget for January $20$x$6.$ Please refer to information below.

$(1)$ Balance Sheet

Balance Sheet

$(2)$ Sales price of product is $$200$ per unit and expected sales units are $4,000$ in January, $5,000$ in

February, $3,000$ in March.

$(3)$ Firm keeps monthly ending inventory as $20\%$ of next month's expected sales units.

$(4)$ Variable manufacturing cost per product unit is as following.

Expected fixed manufacturing overhead in January is $$45,000$ including depreciation of $$20,000.$

$(5)$ Ending inventory for raw material is kept at $30\%$ level of next month's expected production units.

Assume there is no beginning and ending work$-$in$-$process inventory.

$(6)$ Variable selling and administrative expense is $$10$ per unit and the expected fixed selling and

administrative expense in January is $$50,000,$ including depreciation of $$10,000.$

$(7)$ All sales are in credit transaction. $70\%$ of accounts receivable is collected in the month of transaction

and $30\%$ is collected during the next month.

$(8)$ All purchases are in credit. $60\%$ of accounts payable are paid in the month of transaction and $40\%$ is

paid in the following month.

$(9)$ All costs, excluding raw material purchase and depreciation, are paid in full in the month of

transaction.

Requirement

Set sales budget for January.

Set production budget for January and February.

Set raw material purchase budget for January.

Set manufacturing overhead budget for January.

Set COGS budget for January. $($Use FIFO$)$

Set selling & administrative expense budget for January.

Prepare Budgeted Income Statement for January.

Prepare cash budget for January.

Prepare Budgeted Balance Sheet for January $31.$