Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are the new accountant at Beautiful Bikes Ltd . The previous accountant went on vacation leave and never returned so the finance manager was

You are the new accountant at Beautiful Bikes Ltd.
The previous accountant went on vacation leave and never returned so the finance manager was helping with these responsibilities in addition to his other roles.
It is difficult for the manager to be functioning in two roles, so not surprisingly, many tasks have fallen behind, including the budget which must be presented and approved by the end of the month.
Your manager is very happy that you have started in the position so that he can now take some time off to visit his mother in the Phillipines who is very ill.
Budgeting was the favourite part of your college course so you feel really confident about getting everything up to date.
Your first task is to prepare the budget on your own. Additionally, your manager was kind enough to provide you with some information to assist with the budget preparation process.
You will prepare each individual detailed budget as well as the master budget. Sales Budget:
Selling price per unit is $6.00 per unit.
The Total Sale Units Budgeted for the year (January to December) is 200,000 units.
The 200,000 units must be allocated monthly based on trend over the last three years.
The trend would show which months should have higher or lower number of units.
Production Budget:
The management prefers to maintain 10 percent of next months sales in ending inventory.
Beginning inventory = Inventory at end of previous month; for example, February's beginning inventory = January's ending inventory.
Cost of Goods Sold:
The cost of goods per unit is $3.50 per unit.
Administration Budget:
Salary for January to June is $5,000 monthly, but will increase to $6,000 beginning July 1st.
Rent is $24,000 per annum.
Cash Budget:
All sales are on account.
Beautiful Bikes collection pattern is:
70% collected in the month of sale
25% collected in the month following sale
5% is uncollectible
The December 31 accounts receivable balance is $20,000.
Required:
1. Create the individual detailed budgets from January 1 to December 31 for:
Sales
Production
Cost of Goods Sold
Administration
Cash
2. Now prepare the master budget using the information from the individual budgets for January 1 to December 31.

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

Fundamentals Of Cost Accounting

Authors: T.R.Sikka

7th Edition

8130918706, 978-8130918709

More Books

Students also viewed these Accounting questions