Sales Budget & Cash Collection Schedule

ABC Ltd is preparing its budget for 2014. The Management Accountant has accumulated the following information: i. Sales (units) November (actual) 2 500 December (actual) 2 200 January (budgeted) 2 100 February (budgeted) 2 400 March (budgeted) 3 000 April (budgeted) 2 800 All units are sold at a price of $40 ii. Sales are made on the following basis: 30% cash 45% collected in the month following sale 20% collected in the second month following sale 5% uncollectible iii. Monthly purchases are scheduled so that finished goods inventory at the end of any month are sufficient to meet 15% of the expected sales for the following month. Cost of sales is 55%. Purchases are made on a cash basis. iv. Wages and other expenses are $36 000 monthly. This includes $3 000 monthly depreciation expense. v. Employees receive a bonus of 5% on sales in excess of $75 000 vi. The business plans to acquire new equipment in February. The equipment is expected to cost $60 000 and which is to be paid in three equal monthly instalments, commencing in March. a. Prepare a sales budget for the five-month period ending March, 2014. b. Prepare a cash collection schedule for the period January to March, 2014