Built-Tight is preparing its master budget. Budgeted sales and cash payments follow: September $ 57,000 Budgeted sales Budgeted cash payments for Direct materials Direct labor Overhead Beginning cash balance Add: Cash receipts Total cash available Less: Cash payments for Direct materials Direct labor Overhead Sales commissions Office salaries Rent Total cash payments Preliminary cash balance Sales to customers are 20% cash and 80% on credit. Sales in June were $52,500. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $51,000 in cash and $4,200 in loans payable. A minimum cash balance of $51,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $51,000. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. Any preliminary cash balance above $51,000 is used to repay loans at month-end. Expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,200 per month), and rent ($5,700 per month). Loan activity Additional loan Repayment of loan to bank Ending cash balance 2. Prepare a cash budget for the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.) Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month July $ 55,000 BUILT-TIGHT Cash Budget July 15,360 3,240 19,400 5,500 3,200 5,700 52,400 Loan balance July 15, 360 3,240 19,400 0 August $ 71,000 August 12, 640 2,560 16,000 August 58,200 0 12,960 2,640 16,400 September 68,200 September 0 0
Built-Tight is preparing its master budget. Budgeted sales and cash payments follow: September $ 57,000 Budgeted sales Budgeted cash payments for Direct materials Direct labor Overhead Beginning cash balance Add: Cash receipts Total cash available Less: Cash payments for Direct materials Direct labor Overhead Sales commissions Office salaries Rent Total cash payments Preliminary cash balance Sales to customers are 20% cash and 80% on credit. Sales in June were $52,500. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $51,000 in cash and $4,200 in loans payable. A minimum cash balance of $51,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $51,000. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. Any preliminary cash balance above $51,000 is used to repay loans at month-end. Expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,200 per month), and rent ($5,700 per month). Loan activity Additional loan Repayment of loan to bank Ending cash balance 2. Prepare a cash budget for the months of July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Enter your final answers in whole dollars.) Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month July $ 55,000 BUILT-TIGHT Cash Budget July 15,360 3,240 19,400 5,500 3,200 5,700 52,400 Loan balance July 15, 360 3,240 19,400 0 August $ 71,000 August 12, 640 2,560 16,000 August 58,200 0 12,960 2,640 16,400 September 68,200 September 0 0
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.
Question
5
Transcribed Image Text:**Built-Tight Master Budget Overview**
Built-Tight is in the process of preparing its master budget. Below is an overview of the budgeted sales and cash payments for the months of July, August, and September:
**Budgeted Sales and Cash Payments:**
- **Budgeted Sales:**
- July: $55,000
- August: $71,000
- September: $57,000
- **Budgeted Cash Payments for:**
- Direct Materials:
- July: $15,360
- August: $12,640
- September: $12,960
- Direct Labor:
- July: $3,240
- August: $2,560
- September: $2,640
- Overhead:
- July: $19,400
- August: $16,000
- September: $16,400
Sales are composed of 20% cash and 80% credit, with credit sales being collected in the following month. As of June 30, the balance sheet shows $51,000 in cash and $4,200 in loans payable. A minimum cash balance of $51,000 must be maintained. Loans, including interest of 1% per month on the starting balance, are settled at month-end if the cash balance exceeds $51,000. Monthly expenses include sales commissions (10% of sales), office salaries ($3,200), and rent ($5,700).
**Cash Budget Preparation:**
The cash budget for the months of July, August, and September is organized as follows:
1. **Beginning Cash Balance** for each month starts with a specified amount.
2. **Cash Receipts**:
- August: $58,200
- September: $68,200
3. **Total Cash Available**: Summation of beginning balance and cash receipts.
4. **Cash Payments**:
- For direct materials, direct labor, overhead, sales commissions, office salaries, and rent. Values for July include:
- Direct materials: $15,360
- Direct labor: $3,240
- Overhead: $19,400
- Sales commissions: $5,500
- Office salaries: $3,200
- Rent: $5,700
5. **Total Cash Payments** for July are listed as $52,400.
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