Facts To Be Considered for Budget Preparation

Zany Corporation is a merchandise company and needs your assistance in preparing its quarterly budget for Q 2...April, May and June.

Salesfor March were 10,000 units. Each month's sales units are expected to exceed the prior month's sales units by 10%. The product's selling price is $25 per unit.

Sales Commissions of 12% of sales are paid in the month of the sales. The sales manager's monthly salary will be $3,500 in April and $4,000 per month thereafter.

Monthly general and administrative expenses include $8,000 of administrative salaries/health insurance expenses, $5,000 of depreciation, and 0.9% of monthly interest on a long term note payable. In addition, the Company also plans to incurquarterly expenses (spread out evenly each month) for office supplies cost of $3,000, travel and entertainment $1,500 and janitorial cleaning of their office of $1800.

Income tax expensesare budgeted at 30% of pre-tax income...ie: sales less all expenses note above

The Company expects 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (none are collected in the month of the sale).

For the purpose of computing interest expense on the note payable, assume the note payable currently outstanding April 1st is $450,000.

Budgeted Schedule of Cash Receipts using April, May, June and quarter headings and formatted as follows:

Sales

Cash receipts from:

Cash Sales (30% of current sales)

Collections of prior period Sales

Total Cash Receipts