ABDF Company specializes in unique baskets. The company has budgeted the following sales for the first four months of the year: Month Expected sales in units January 4,000 February 6,000 March 20,000 April 2,000 The selling price of the baskets is $30 per unit. Based on history, the company expects that 10% of sales are cash received in the month of sale. Of the credit sales, half is collected one month after sale and the remainder is collected two months after sale. Accounts receivable as at January 1st was $100,000; all of which is expected to be collected in January. The company wants ending inventory to be equal to 20% of the following month’s budgeted sales in units. On January 1st, 1,000 units were on hand. Required: a. Prepare a sales budget for the first quarter of the year. b. Prepare a schedule of expected cash collections for the first quarter of the year. c. Prepare a production budget for the first quarter of the year.
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.
- ABDF Company specializes in unique baskets. The company has budgeted the following sales for the first four months of the year:
|
Month |
Expected sales in units |
|
January |
4,000 |
|
February |
6,000 |
|
March |
20,000 |
|
April |
2,000 |
The selling price of the baskets is $30 per unit. Based on history, the company expects that 10% of sales are cash received in the month of sale. Of the credit sales, half is collected one month after sale and the remainder is collected two months after sale.
The company wants ending inventory to be equal to 20% of the following month’s budgeted sales in units. On January 1st, 1,000 units were on hand.
Required:
a. Prepare a sales budget for the first quarter of the year.
b. Prepare a schedule of expected cash collections for the first quarter of the year.
c. Prepare a production budget for the first quarter of the year.
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