Three Budgets Johnson Company is planning for the first 6 months of 2020. Johnson's estimated sales (in units) each month: January-100,000, February-120,000; March-130,000, April-120,000, May 115,000, June 110,000. The product sells for a price of $15.00 per unit. Create a sales budget, cash collections budget and a production budget. SALES BUDGET Sales (in units) Price per Unit Sales Revenue January February March April May June Total 50 50 $0 $0 50 50 50-SUM(C11H11) The company's cash collections typically happen in a pattern of 60% of the sales collected in the month of sale and the remaining 40% collected in the month following the sale. Note: December's sales were 90,000 units priced 5 at $15. Create a cash collections budget 6 7 CASH COLLECTIONS BUDGET 18 January February March April May June Total 19 Sales Revenue 20 60% of Current Month's Sales 21 40% of Last Month's Sales 22 Total Collections 23 40% of $1,350,000 in January 24 SUM(C2020) SUM(CZ121) -120-121 25 The Production Budget, unlike the ones shown above, is constructed in units, NOT DOLLARS. The objective is to determine how many units 26 to produce. You are already familiar with the basic inventory formula: BEGINNING INVENTORY + UNITS PRODUCED ENDING INVENTORY UNITS SOLD 27 But, if we are trying to figure out the UNITS PRODUCED (in this case UNITS TO PRODUCE), we need to switch the formula around. Like this: 28 UNITS TO PRODUCE UNITS SOLD ENDING INVENTORY BEGINNING INVENTORY 29 Using the sales budget, we already know the UNITS SOLD each month. We must derive the UNITS TO PRODUCE 30 31 For the production budget, Johnson wishes to end each month with enough inventory to cover 25% of next month's sales. Let us 32 also assume that July's sales are likely to be 90,000 units. Assume the beginning inventory in January was 25,000 units. 33 The format of the production budget is as follows