Question
Data Scenario: You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has
Data Scenario:
You have just been hired into a management position which requires the application of your budgeting skills. You find out that budgeting has not been a priority of the company and that they have been experiencing cash shortages. You have contacted various areas on the organization and have accumulated the information below to assist you in preparing a comprehensive budget.
The following is actual information that relates to the operations of a merchandiser named Sled Company,a wholesaler of sleds as of March 31.
Cash $1,000
Accounts receivable13,680
Inventory 10,757
Accounts Payable$15,781
Actual and Budgeted sales dollar Data-Sales Budget:
March (actual)$38,000
April$36,000
May$37,000
June$39,000
July$35,000
Sales are the following type:64%Cash sales collected in month of sale
36% Credit sales collected in the following month of sale
Credit sales are collected in the month following sale.The accounts receivable at March 31 are a result of March credit sales.
Cost of goods sold equals83%of sales price
At the end of each month, inventory is to be on hand(ending inventory) equal to36%of following month's sales needs, stated at cost.
Inventory purchases are paid49%in month of purchase51%in month after purchase. The accounts payable at March 31 is a result of March purchases of inventory.I have set up a calculation on the budget worksheet to show you this calculation.
Monthly selling expenses are as follows and are paid in the month incurred if it is a cash expense.
Salaries and wages 8%of sales dollar
Commissions 3% of sales dollar
Advertising $900 per month
Utilities $200per month
Monthly general and administrative expenses are as follows and are paid in the month incurred if it is a cash expense.
Rent $2,000 per month
Depreciation$500 for month
Required:You must use cell references on the BudgetSolution worksheet, by referencing this worksheet that contains the data.
Prepare the following second quarter budgets and answer the questions listed on the template provided on the BudgetSolution Worksheet.I have adapted the budget model to meet the needs of this company.
If I bolded a line item, that is a header and does not need computation on that row.
Please note the quarter column is for the quarter so not all lines should be added across in the quarter column.When you have beginning and ending inventory or cash balances this is for the quarter and should be brought over to the quarter column.
1. Prepare Sales Budget in dollars by month and quarter.
2.Prepare merchandise purchase budget by month and quarter in dollars.
3.Prepare SellingExpense Budget, by month and quarter.
4.Prepare General and Administrative budget, by month and quarter.
5.Prepare cash budget showing the months and quarter.
6.Based on the quarterly cash budget prepared, do you have any recommendations on cash management. Discuss the type of business and the cash flow problems a company in this industry might have.
Answer on the budget worksheet , where I have set out the question.
7.Prepare budgeted income statement for the quarter ending June 30, 20XX. You do not need to show monthly columns.I entered Sales for you on the income statement
8.What do you think about the survivability of this business?
9.What if the company finds out the monthly rent will increase to $2,500, what budgets are effected? Why? What is the New Net income(Loss) for the quarter?
If you have linked everything correctly, you should only have to change the monthly rent on this sheet to determine your answer to the questions asked.Please change the rent back to the original amount of 2,000 before you submit.
#1
Sled Company
Sales Budget for the quarter ending June 30, 20XX
April May June Quarter
Sales
#2
Sled Company
PurchaseBudget
For the quarter ended June 30, 20XX
April May June Quarter
Budgeted Sales
Current Cost of goods sold
Desired Ending inventory
Total needs
Less: Beginning Inventory
Total purchase cost
#3Sled Company
Selling Expense Budget
For the quarter ended June 30,20XX
April May June Quarter
Budgeted Sales
Variable selling expenses
Salaries and wages
Commissions
Total variable cash expenses
Fixed Selling expenses:
Advertising
Utilities
Total fixed expenses
Total selling expenses
#4Sled Company
General and Administrative Expense Budget
For the quarter ended June 30,20XX
April May June Quarter
General and Administrative Expenses:
Rent
Depreciation
Total general and administrative expenses
#5
Sled Company
Cash Budget
For the quarter ended June 30, 20XX
April May June Quarter
Beginning cash
Add Cash Collections of Sales:
Cash sales collected in month sale
Credit sales Collected in following month
Total Cash receipts from collection of sales
Cash Available for operations
Less Cash Disbursements:
Cash payments for purchases paid in month
Cash payments made in month after purchase
Total Cash payments for merchandise purchased
Cash Variable Selling Expenses
Cash General and administrative expenses
Total cash Disbursements
Ending cash
6.Based on the quarterly cash budget you prepared, do you have any recommendations on cash management. Discuss the type of business and the cash flow problems a company in this industry might have.
#7
Sled Company
Budgeted Income Statement
For the quarter ended June30, 20XX
Sales
Cost of goods sold
Gross profit
Other Expenses
Selling Expenses
General and administrative expenses
Income(Loss) from operations
8.What do you think about the survivability of this business?
9.What if the company finds out the monthly rent will increase to $2,500, what budgets are effected? Why?What is the New Operating income(Loss) for the quarter?
If you have linked everything correctly, you should only have to change the monthly rent
on this sheet to determine your answer to the questions asked.Please change the rent back to the original amount of 2,000 before you submit.
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