Question
Power-Ride Inc. is a privately owned business in Western Canada that has found success with the production of two-wheeled, self-balancing personal transportation vehicles called Ride-Outs.
Power-Ride Inc. is a privately owned business in Western Canada that has found success with the production of two-wheeled, self-balancing personal transportation vehicles called Ride-Outs. The popularity of two-wheeled personal transportation vehicles is continuing to grow in both the private consumer and commercial markets. Two-wheeled personal transportation vehicles give people the option to use battery power as an alternative to cycling or walking.
Power-Ride was founded eight years ago by two siblings, Ryan and Nick, who love the outdoors. Ryan suffers from severe asthma and had to significantly reduce his outdoor activities until he discovered two-wheeled personal transportation vehicles during a European vacation. He is very passionate about the business. Given that the business is mostly seasonal, growth is heavily dependent on the weather; however, the company is seeing an overall steady growth pattern.
It is now October 2019, and it is time to start preparing the 2020 budget for presentation to the board.
You, CPA, are the controller for Power-Ride and have been asked by the owners to help prepare the documents required for the budget.
Task #1
Ride-Out sales are highest in the spring and summer months, when private consumer purchases peak. The most profitable months are always March to May, when outdoor adventure stores are preparing for the summer season.
This past summer was a difficult one. Due to poor weather across the region, annual sales last year dipped 4% over the prior three-year average. Fortunately, there is no indication that the bad weather will repeat this year.
You have obtained the following sales data for the past 12 months:
Month Units sold
January 74
February 90
March 210
April 240
May 255
June 205
July 180
August 160
September 90
October (forecast) 85
November (forecast) 70
December (forecast) 65
Power-Ride had a one-time special order in April for 15 Ride-Outs that is not expected
to occur this upcoming year. One of Power-Ride's retailers, Outfitters Inc., recently
closed. It accounted for 5% of regular sales for January to March, and 8% of regular
sales for the remainder of the year. The Ride-Outs currently sell for $1,400 per unit, and
the company is planning to increase the selling price by 5% for the coming year.
Market research shows that two-wheeled personal transportation vehicles are gaining
popularity with those who live in hilly or windy areas and those with reduced fitness
levels. As a result, experts are predicting that sales growth in this market will be at least
6% in the coming year. Power-Ride requires inventories of finished goods on hand at
the end of each month to be equal to 50% of the following month's budgeted sales.
Power-Ride expects to have 20 units on hand on December 31, 2019.
How do I prepare a monthly sales budget in both units and dollars for the 2020 fiscal year. In
addition, how do I prepare a budget in units to forecast required monthly production to meet
expected sales.
step by step answer please
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