Home Work Assignment 3 (30 points)-Excel Budget Assignment
Review Problem: Completing a Master Budget for the 2nd Quarter, Pages 355- 359 (Chapter 9: Budgeting)) of your Text book: Managerial Accounting by Garrison, Libby and Webb, Eleventh Canadian Edition.
Required:
Create the following components of the Master Budget for ROCKET COMPANY in a Microsoft Excel Spreadsheet for the 2nd Quarter. To get full marks all Excel Cells have to be properly linked using Formulas and proper statement format has to be followed.
Prepare ONLY the following budgets. You do not have to do the collection schedules, cash budget or the budgeted balanced sheet.
Link the excel formulas so that question 5 can be answered without recreating the entire budget.
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SALES BUDGET-Monthly and in total
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MERCHANDISE PURCHASE BUDGET-monthly and in total
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SELLING AND ADMINISTRATION BUDGET-monthly and in total
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INCOME STATEMENT for the Quarter ended June 30th
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What would be the operating income if the gross margin is reduced from 40% to
35%? What is the ending merchandise inventory?
QUESTIONS;
chandising operation that prepares its master budget on a quarterly basis. restating the budget at the end of a reporting period using actual activity levels and budgeted per unit amounts for revenues and variable expenses. A flexible budget provides a better tool for evalu ating managers' performance in generating revenue and controlling costs, given the actual volume Preparing flexible budgets also permits companies to prepare performance reports that decompose the difference between actual results and the static budget into flexible budget variances and sales volume variances. This approach is helpful in isolating the cause of variances and forms the basis the planned programs and activities. Then the revenues needed to support the programs and related expenditures are determined and budgeted. This approach is necessitated by the fact that in NFP levelsPreparing flexible budgets involves for further investigation. (L041 of activity. (L031 REVIEW PROBLEM: COMPLETING A MASTER BUDGET enities there is often Gither relationship between revenues and expenditures because revenues often come from donors or other granting agencies. (LOSI At the end of the previous quarter (March 31), the organization's balance sheet showed the follow- ing account balances: Cash Accounts receivable Inventory Buildings and equipment (net) Accounts payable.. Common shares Retained earnings $ 9,000 48,000 12,600 214,100 $ 18,300 190.000 75.400 $283,700 S283.700 b Actual sales for March and budgeted sales for April through July are as follows: March (actual) April. May June July S60,000 $70,000 $85.000 $90,000 $50,000 c. Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following the sale. The accounts receivable at March 31 are a result of March credit sales. d. The company's gross margin is 40% of sales. (In other words, the cost of goods sold is 60% of sales.) e. Monthly expenses are budgeted as follows: salaries and wages. $7,500 per month, shipping, 6% of sales, advertising, $6,000 per month; other expenses, 4% of sales. Depreciation, including depre- ciation on new assets acquired during the quarter, will be $6,000 for the quarter. Hall of a month's inventory purchases are paid for in the month of purchase and halt in the Each month's ending inventory should equal 309 of the following month's cost of goods so Equipment purchases during the quarter will be as follows: April 11,500, and May $3.000 Management wants to maintain a minimum cash balance of $8,000. The company has an ment with a local hank that allows the company to borrow necessary amounts at the begin each month, up to a total loan balance of $20,000. The interest rate is 1% per month. The company will, as far as it is able, repuy the loan at the end of each month and must pay interest each Using the data above, complete the following statements and schedules for the second quarter: Chapter Budgeting ing month Dividends totalling $3,500 will be declared and paid in June. ante on the total loun balance outstanding for that month. : 1 Sales budget and a schedule of expected cash collections: April March (actual) May June July Sales Budget Total Sales Cash (20%).... Credit (80%)............ $60,000 $12.000 48,000 $70,000 $14.000 56,000 All credit sales are collected in the month following the sale. April May June Total Schedule of Expected Cash Collections Cash sales .................. $14,000 Credit sales ................. 48,000 Total collections ............. $62.000 2. a. Merchandise purchases budget: April May June Total $51.000 Budgeted cost of goods sold..... Add desired ending inventory.... Total needs Less beginning inventory Required purchases. *$70,000 sales x 60% = $42.000 $51.000 x 30% = $15,300 $42.000 15,300 57,300 12,600 $44.700 b. Schedule of expected cash disbursements for merchandise purchases: May June Total For March purchases For April purchases For May purchases For June purchases..... Total cash disbursements for purchases April $18,300 22,350 $22,350 $18,300 44,700 $40.650 Schedule of expected cash disbursements for selling and administrative expenses Tal cash disbursements for selling and For selling and administrative expenses. Chapter Budgeting 357 May June Total Salaries and wages Shipping Advertising Other expenses April $ 1.500 4,200 6,000 2.800 administrative expenses $20.500 Cash budget 4 May June Total April $ 9,000 62.000 71.000 40.650 20,500 11.500 Cash balance, beginning Add cash collections Total cash available. Less cash disbursements: For inventory purchases For equipment purchases For dividends Total cash disbursements Excess (deficiency) of cash Financing Borrowings Repayments Interest Total financing Cash balance, ending 72.650 S (1.650) 9,747 0 (97) 9.650 $ 8.000 April: ($1,650) + X - 001X = $8,000; X = $9.747 (rounded) ** April: 59,747 x 1% = 597 5. Prepare an absorption costing income statement for the quarter ending June 30, as shown in Schedule 9 6. Prepare a balance sheet as at June 30. Solution to Review Problem 1. Sales budget: March (actual) April May June July Total Sales $60,000 $70,000 $85.000 $90,000 $50,000 Cash (20%) S12.000 $14.000 $17.000 $18,000 S10,000 Credit (80%) 48.000 56,000 68,000 72.000 40,000 All credit sales are collected in the month following the sale. April May June Total Schedule of Expected Cash Collections Cash sales Credit sales Total collections $14.000 48.000 $62,000 $17.000 $18,000 $ 49,000 56,000 68,000 172,000 $73.000 $86,000 $221,000 Chapter 9 Budgeting 5 May June Merchandise purchases budget: $54.000 S1473 April $42.000 15,300 57,300 12,600 $44,700 $51.000 16,200 67,200 15,300 $51.900 9.000 63.000 16,200 $46,800 156 12.12 $143 AX Sal Budgeted cost of goods sold Add desired ending inventory" Total needs.. Less beginning inventory Required purchases..... * At April 30 551.000 x 300 - 515,300 Al June 30, SSC,000 July sales x 60 x 305 59.000 G S s Schedule of cash disbursements for purchases: April May June Total $18,300 22.350 $22,350 25.950 $25.950 23.400 $18.30 44,700 51.90 23.400 For March purchases........ For April purchases For May purchases For June purchases Total cash disbursements $40.650 $48,300 $49,350 $138,300 3 Schedule of cash disbursements for selling and administrative expenses: April May June Total $ 7,500 4,200 6,000 2,800 $ 7.500 5.100 6,000 3.400 $ 7,500 5,400 6,000 3,600 $22,500 14,700 18.000 9.800 Salaries and wages Shipping (6% of sales) Advertising ..... Other expenses (4% of sales) Total cash disbursements for selling and administrative expenses ........... $20,500 $22,000 $22,500 $65.000 4. Cash budget April May June Total $ 9,000 62.000 71.000 $ 8,000 $8,000 $ 9,000 73.000 86,000 81.000 94,000 230,000 221.000 Cash balance, beginning. Add cash collections Total cash available Less disbursements: For inventory purchases .... For selling and administrative expenses For equipment purchases For dividends Total disbursements Excess (deficiency) of cash 40,650 20,500 11.500 0 72.650 (1,650) 48,300 22,000 3,000 0 73,300 7,700 49,350 22,500 0 3,500 75,350 18,650 138,300 65.000 14,500 3.500 221,300 8,700 Financing (10,249) Borrowings 9,747 401 0 10.148 Repayments. 0 0 (10,148) (10.148) Interest ... ) (97) (101) (101) (299) Total financing 9,650 300 (299) Cash balance, ending $ 8,000 $ 8,000 $ 8,401 $ 8,401 *April: ($1,650) + X -0.01X = $8,000; X = $9,747 (rounded) May: 57,700 + X -0.01% - 597 (interest on April loan) = $8,000; X = $401 (rounded) **April: $9,747 x 1% = $97; May and June: (59,747 + $401) X 1% = $101 Selling and administrative expenses: Nie OGS can also be computed as follows: Sales of $245,000 x 605 - $147,000 Chapter 9 Budgeting statement ROCKET COMPANY Income Statement For the Quarter Ended June 30 $245.000 S 12,600 143.400 156.000 9,000 147.000 98.000 Cost of goods sold (CGS) Beginning inventory (given). Add purchases (Part 2) Gads available for sale Finding inventory (Part 2) Gruss margin... Salaries and wages (Part 3) Shipping (Part 3) Advertising (Part 3) Depreciation Other expenses (Part 3) Operating income Less interest expense (Part 4). Not income 22.500 14,700 18.000 6,000 9,800 71.000 27.000 299 $ 26,701 6. Balance sheet: ROCKET COMPANY Balance Sheet June 30 Assets Current assets: Cash (Part 4) Accounts receivable (80% x $90,000) Inventory (Part 2) Total current assets. Buildings and equipment, net ($214,100 + S14,500 - $6,000). Total assets.. $ 8.401 72.000 9,000 89.401 222,600 S 312,001 $ 23,400 Liabilities and Shareholders' Equity Current liabilities: Accounts payable (Part 2: 50% X $46,800) Shareholders' equity: Common shares $190,000 Retained earnings 98,601 Total liabilities and shareholders' equity *Retained earnings, beginning $ 75,400 Add net income 26,701 102,101 Less dividends 3,500 Retained earnings, ending.. $ 98,601 288,601 $ 312,001 Total
