Marks

Korn Company Ltd is preparing its master budget for 2022. Relevant data pertaining to its budgets are provided in the following parts. Please complete Part 1, to be able to complete Part 2.

Part 1

Sales for the year are expected to total 4,000,000 units. Quarterly sales are 20%, 35%, 15%, and 30%, respectively.

The sales price is expected to be $1.50 per unit for the first and second quarter and then be increased by 20% in the third quarterand another 10% increase in the fourth quarter.

Past experience has indicated that 80% of sales each quarter are on credit and that collection of credit sales occurs as follows: 60% in the quarter of sale, 30% in the following quarter of the sale, and 5% in the second following quarter of the sale. The other 5% is uncollectable.

Required:

a) Prepare a sales budget for 2022 for Korn Company Ltd.3 marks

b) Prepare a schedule of estimated cash collections from revenue for the third and fourth quarters of 2022.5 marks

Part 2

Cost of sales is expected to be 60% of the quarters sales.

Desired ending inventory is 25% of the following quarters cost of sales.

Required:

Prepare the purchase budget for the second and third quarter of 20225 marks