Angelini's has been in business since January of the current year. The company buys fresh pasta and resells it to large supermarket chains. The following information pertains to Angelini's first four months of operations: January February March April Purchases $50,000 40,000 55,000 25,000 Sales $80,000 60,000 90,000 40,000 Angelini's expects to open several new sales territories in May. In anticipation of increased volume, management forecasts May sales at $100,000. To meet this demand, purchases in May are budgeted at $60,000. The company maintains a gross profit margin of approximately 40 percent. All of Angelini's sales are on account. Due to strict credit policies, the company has no bad debt expense. The following collection performance is anticipated for the remainder of the year: Percent collected in month of sale Percent collected in month following sale Percent collected in the second month following sale 40% 50 10 Angelini's normally pays for 75 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the following month. The company's fixed selling and administrative expenses average $10,000 per month. Of this amount, $3,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred. Angelini's debt service is $4,000 per month. Of this amount, approximately $3,000 represents interest expense, and $1,000 is payment on the principal. The company's tax rate is approximately 25 percent. Quarterly tax payments are made at the end of March, June, September, and December. Instructions: a. Prepare Angelini's budgeted income statement for May.
Angelini's has been in business since January of the current year. The company buys fresh pasta and resells it to large supermarket chains. The following information pertains to Angelini's first four months of operations: January February March April Purchases $50,000 40,000 55,000 25,000 Sales $80,000 60,000 90,000 40,000 Angelini's expects to open several new sales territories in May. In anticipation of increased volume, management forecasts May sales at $100,000. To meet this demand, purchases in May are budgeted at $60,000. The company maintains a gross profit margin of approximately 40 percent. All of Angelini's sales are on account. Due to strict credit policies, the company has no bad debt expense. The following collection performance is anticipated for the remainder of the year: Percent collected in month of sale Percent collected in month following sale Percent collected in the second month following sale 40% 50 10 Angelini's normally pays for 75 percent of its purchases in the month that the purchases are made. The remaining amount is paid in the following month. The company's fixed selling and administrative expenses average $10,000 per month. Of this amount, $3,000 is depreciation expense. Variable selling and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling and administrative expenses in the month that they are incurred. Angelini's debt service is $4,000 per month. Of this amount, approximately $3,000 represents interest expense, and $1,000 is payment on the principal. The company's tax rate is approximately 25 percent. Quarterly tax payments are made at the end of March, June, September, and December. Instructions: a. Prepare Angelini's budgeted income statement for May.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:Angelini's has been in business since January of the current year. The company buys fresh pasta and
resells it to large supermarket chains. The following information pertains to Angelini's first four
months of operations:
Purchases
$50,000
January
February
March
April
40,000
55,000
25,000
Sales
$80,000
60,000
90,000
40,000
Angelini's expects to open several new sales territories in May. In anticipation of increased volume,
management forecasts May sales at $100,000. To meet this demand, purchases in May are budgeted
at $60,000. The company maintains a gross profit margin of approximately 40 percent.
All of Angelini's sales are on account. Due to strict credit policies, the company has no bad debt
expense. The following collection performance is anticipated for the remainder of the year:
Percent collected in month of sale
Percent collected in month following sale
Percent collected in the second month following sale
40%
50
10
Angelini's normally pays for 75 percent of its purchases in the month that the purchases are made.
The remaining amount is paid in the following month. The company's fixed selling and administrative
expenses average $10,000 per month. Of this amount, $3,000 is depreciation expense. Variable selling
and administrative expenses are budgeted at 5 percent of sales. The company pays all of its selling
and administrative expenses in the month that they are incurred.
Angelini's debt service is $4,000 per month. Of this amount, approximately $3,000 represents interest
expense, and $1,000 is payment on the principal. The company's tax rate is approximately 25 percent.
Quarterly tax payments are made at the end of March, June, September, and December.
Instructions:
a. Prepare Angelini's budgeted income statement for May.
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