At March 31 Poly Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totaling £85,000. Sales, in units, have been budgeted as follows for the next four months: April: 60000 May: 75000 June: 90000 July: 81000 Poly's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales. The selling price is £2 per unit. One-third of sales are paid by customers in the month of the sale, the balance is collected in the following month. Required: a. Prepare a merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June.
At March 31 Poly Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totaling £85,000. Sales, in units, have been budgeted as follows for the next four months: April: 60000 May: 75000 June: 90000 July: 81000 Poly's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales. The selling price is £2 per unit. One-third of sales are paid by customers in the month of the sale, the balance is collected in the following month. Required: a. Prepare a merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June.
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
At March 31 Poly Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totaling £85,000. Sales, in units, have been budgeted as follows for the next four months:
April: 60000
May: 75000
June: 90000
July: 81000
Poly's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales.
The selling price is £2 per unit. One-third of sales are paid by customers in the month of the sale, the balance is collected in the following month.
Required:
a. Prepare a merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June.
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