Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question 14 Management Accounting - Budgeting: Megatron Sports Company (MSC hereafter) is a retailer and sells basketball sneakers in Cybertan City. The company is preparing

image text in transcribed
Question 14 Management Accounting - Budgeting: Megatron Sports Company (MSC hereafter) is a retailer and sells basketball sneakers in Cybertan City. The company is preparing budgets for the fourth quarter of 2020. For budgeting purposes, MSC estimates that cost of goods sold is 70% of sales. The following information has been provided: Month November December Sales Volume 4,000 3,500 Sales Revenue 900,000 1,200,000 1,050,000 1,140,000 730,000 Cash Collection 1,080,000 1,110,000 1,104,000 Inventory purchase: The inventory policy indicates that the desired ending inventory for each month should be sufcient to cover 50% of the next month's sales. The amount of inventory on hand on 30 September 2020 is exactly 60% of next month's sales. The company has a current payment policy for inventory purchase as follows: 0 60% of each month's purchases are cash purchase. 0 30% of each month's purchases will be paid in the following month. . 10% of each month's purchases will be paid in the second month following. On 30 September 2020, the accounts payable balance was $256,200 (of which $37,800 is from August), which will be paid out to the supplier in October and November. Selling and administration: The selling and administrative m includes a depreciation expense of $50,000 each month. The selling and administrative expenses are paid for in the month incurred. The W for selling and administrative expense is $125,000 for October, $135,000 for November and $145,000 for December. Begum a) Prepare an inventory purchase budget in dollars for the fourth quarter of 2020 using the template in the Answer Booklet (Round your answers to the nearest whole number). (5 marks) b) Prepare a projected income statement for the fourth quarter of 2020 using the template in the Answer Booklet (Round your answers to the nearest whole number). (2 marks) c) The CEO of MSC, Fallen, recently told the sales 81 marketing department that the budget for sales would be increased by 20% for the coming year (Le, 2021) and the department manager's bonus would be based on achieving the sales target. (i) What budgeting style is MSC adopting? {1 mark) (ii) What is one potential behavioural effect of setting the sales target in this way? (2 marks max 50 words)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting

Authors: James A Heintz, Robert W Parry

20th Edition

538745215, 978-1111624743

More Books

Students also viewed these Accounting questions

Question

How can the explanatory variables be checked for collinearity?

Answered: 1 week ago

Question

Food supply

Answered: 1 week ago

Question

Mortality rate

Answered: 1 week ago