La Belle Pâtisserie in Lyon, France, relies on budgeting to manage its pastry manufacturingand sales operations. Assume that La Belle Pâtisserie prepares monthly cash budgets.Relevant data from assumed operating budgets for 2021 are as follows:JanuaryFebruary€ 460,000185,00070,00050,00085,000€ 412,000210,000-85,000e65,00095,000SalesDirect material purchasesDirect laborManufacturing overheadSelling and administrative expensesAssume that La Belle sells pastry in its own shops as well as to other stores. Collections areexpected to be 75% in the month of sale, and 25% in the month following sale. La Belle pays60% of direct materials purchases in cash in the month of purchase, and the balance due inthe month following the purchase. All other items above are paid in the month incurred.(Depreciation has been excluded from manufacturing overhead and selling andadministrative expenses.)eOther data:4(1) Sales: December 2020, € 320,000e(2) Purchases of direct materials: December 2020, € 175,000«(3) Other receipts: January-First quarter COVID-19 small business relief subsidy fromeLyon City Government, € 2,000February-Sale of used equipment, € 4,000(4) Other disbursements: February-Purchased equipment, € 10,000-(5) Repaid debt: January, € 30,000eThe company's cash balance on January 1, 2021, is expected to be € 50,000. The companywants to maintain a minimum cash balance of € 45,000.eInstructions1. Prepare schedules foreA. Expected collections from customers (25%)-B. Expected payments for direct materials purchases for January and February (25%)2. Prepare a cash budget for January and February in tabular format. (50%)-

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

La Belle Pâtisserie in Lyon, France, relies on budgeting to manage its pastry manufacturing
and sales operations. Assume that La Belle Pâtisserie prepares monthly cash budgets.
Relevant data from assumed operating budgets for 2021 are as follows:
January
February
€ 460,000
185,000
70,000
50,000
85,000
€ 412,000
210,000-
85,000e
65,000
95,000
Sales
Direct material purchases
Direct labor
Manufacturing overhead
Selling and administrative expenses
Assume that La Belle sells pastry in its own shops as well as to other stores. Collections are
expected to be 75% in the month of sale, and 25% in the month following sale. La Belle pays
60% of direct materials purchases in cash in the month of purchase, and the balance due in
the month following the purchase. All other items above are paid in the month incurred.
(Depreciation has been excluded from manufacturing overhead and selling and
administrative expenses.)e
Other data:4
(1) Sales: December 2020, € 320,000e
(2) Purchases of direct materials: December 2020, € 175,000«
(3) Other receipts: January-First quarter COVID-19 small business relief subsidy frome
Lyon City Government, € 2,000
February-Sale of used equipment, € 4,000
(4) Other disbursements: February-Purchased equipment, € 10,000-
(5) Repaid debt: January, € 30,000e
The company's cash balance on January 1, 2021, is expected to be € 50,000. The company
wants to maintain a minimum cash balance of € 45,000.e
Instructions
1. Prepare schedules fore
A. Expected collections from customers (25%)-
B. Expected payments for direct materials purchases for January and February (25%)
2. Prepare a cash budget for January and February in tabular format. (50%)-

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