Sales Budget Example 3.6

Purchases Budget Example 3.10

Pater's Paints expects the following sales in units in the last quarter (Oct-Dec) of 2020: Oct 44,000; Nov 58,000; Dec 66,000 and 60,000 for January 2021. The business has inventory of 8,800 finished units on hand at 1st October and has a target finished inventory of 20% of the following month's sales units. The units are purchased for $15 and sold for $35 each. Payment for purchases is made in the month following purchase. Accounts payable for purchases as at 30 September was $612,000. Required: 1. Prepare the sales budget for the quarter October - December 2020 (showing each month and the total for the quarter) (see format p. 106 Exhibit 3.6 the first 3 lines only). You do not need to prepare/include the cash/credit sales split or the schedule of expected cash collections. 2. Prepare the purchases budget for the quarter October - December 2020 (showing each month and the total for the quarter) (see format p.110 Exhibit 3.10) You do need to include the expected payments for purchases. , 3. The marketing manager has informed the management accountant that she now expects sales in January 2021 to be much lower than anticipated. The management accountant does not think that this will have any effect on the Oct-Dec 2020 purchases budget, as this is beyond the budget period. Do you think that he is correct? Can you think of any figure(s) in the 2020 budget that may need re-evaluating, and if so, why? CAF REVIVE Sales budget - cups of coffee First quarter 20X2 January February 880 1320 $ 5.50 $ 5.50 $4840 $7260 March Budgeted total unit sales - cups of coffee Budgeted selling price per cup Budgeted total sales revenue 600 $ 5.50 $3300 Quarter 2 800 $ 5.50 $15 400 $4598 $ 242 $4840 $6 897 $363 $7260 $3135 $ 165 $3300 $14630 $ 770 $15 400 Budgeted cash sales (95% of total sales revenue) Budgeted credit sales (5% of total sales revenue) Budgeted total sales revenue Expected cash collections: From cash sales From January credit sales From February credit sales From March credit sales Total cash collections $3135 $4598 $ 1610 $6 897 $ 81" $ 242 $14630 $ 242 $363 $ 110 $ 121 $ 110 $3366 $4759 $7220 $15 345 Caf Revive estimates that it will collect two-thirds of each month's credit sales during the month of sale it will collect the remaining one-third in the month following the sale. Al figures rounded to the nearest dollar. CAF REVIVE Purchases budget First quarter 20X2 January February March Quarter 880 1320 600 2 800 880 1760 400 1720 8007 1 400 800+ 3600 Budgeted total unit sales (cups of coffee) Add Desired ending inventory of coffee supplies Total coffee supplies required Less: Beginning inventory of coffee supplies Budgeted purchases of coffee supplies Purchase price per cup of coffee Cost of purchases Cash payments for purchases (1 025) 735 $ 2.20 $ 1617 (880) 840 $ 2.20 $1848 (400) 1000 $ 2.20 $2 200 (1 025)" 2575 $ 2.20 $ 5665 $ 2256 $1617 $1848 $ 5720 The desired ending inventory is as next month's budgeted sales. April's budgeted sales are 1200 cups of coffee The desired ending inventory at the end of the quarter is the same as the desired ending inventory at the end of March which is the end of the quarter). $ The beginning inventory is the same as the previous month's ending inventory. Supplies for approximately 1025 cups of coffee, at a total purchase price of $2255, ordered in December 20x1 prepare for the start of business The quarter's beginning inventory is the same as December's ending inventory Januay's beginning inventory)