Bloom Corp. produces one product that sells at $20 per unit and sells best on Valentine's Day and Mother’s Day. As a result peak sales occur in February and May of each year. Budgeted sales in units for the first six months of the coming year are: Month Units January 12,000 February 32,000 March 18,000 April 34,000 May 30,000 June 15,000 25% of all sales are cash sales and the rest are on account. Past experience shows that the company collects 25% of a month’s credit sales in the month of sale. Another 65% of credit sales are collected in the month following the sale, and the remaining 10% of credit sales are collected in the second month following the sale. Bad debts are negligible and can be ignored. To ensure that sales volumes can be met, the company requires that ending inventory for a particular month reflect 15% of next month's sales. Ending inventory on June 30th will be 1,500 units. Calculate: Prepare a sales budget in dollars and a schedule of cash collections from sales, by month and in total, for the second quarter. If the company prepares a budgeted balance sheet as of June 30, compute the accounts receivable as of that date. Prepare a production budget by month and in total for the first quarter.
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.
Bloom Corp. produces one product that sells at $20 per unit and sells best on Valentine's Day and Mother’s Day. As a result peak sales occur in February and May of each year. Budgeted sales in units for the first six months of the coming year are:
| Month | Units |
| January | 12,000 |
| February | 32,000 |
| March | 18,000 |
| April | 34,000 |
| May | 30,000 |
| June | 15,000 |
25% of all sales are cash sales and the rest are on account. Past experience shows that the company collects 25% of a month’s credit sales in the month of sale. Another 65% of credit sales are collected in the month following the sale, and the remaining 10% of credit sales are collected in the second month following the sale.
To ensure that sales volumes can be met, the company requires that ending inventory for a particular month reflect 15% of next month's sales. Ending inventory on June 30th will be 1,500 units.
Calculate:
- Prepare a sales budget in dollars and a schedule of cash collections from sales, by month and in total, for the second quarter.
- If the company prepares a budgeted
balance sheet as of June 30, compute theaccounts receivable as of that date. - Prepare a production budget by month and in total for the first quarter.
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