Clay Company has projected sales and production in units for the second quarter of the coming year as follows: April May June Sales 50,000 40,000 60,000 Production 60,000 50,000 50,000 Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month, paid in the month incurred. The accounts payable balance on March 31 totals $190,000, which will be paid in April. All units are sold on account (as credit sales) for $14 each. There are no cash sales. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $500,000 and the full amount is expected to be collected by end of April. Required: a. Prepare a schedule for each month showing budgeted cash disbursements for the Clay Company. b. Prepare a schedule for each month showing budgeted cash receipts for the Clay Company.
Clay Company has projected sales and production in units for the second quarter of the coming year as follows: April May June Sales 50,000 40,000 60,000 Production 60,000 50,000 50,000 Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month, paid in the month incurred. The accounts payable balance on March 31 totals $190,000, which will be paid in April. All units are sold on account (as credit sales) for $14 each. There are no cash sales. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $500,000 and the full amount is expected to be collected by end of April. Required: a. Prepare a schedule for each month showing budgeted cash disbursements for the Clay Company. b. Prepare a schedule for each month showing budgeted cash receipts for the Clay Company.
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
Clay Company has projected sales and production in units for the second quarter of the coming
year as follows:
April May June
Sales 50,000 40,000 60,000
Production 60,000 50,000 50,000
Cash-related production costs are budgeted at $5 per unit produced. Of these production costs,
40% are paid in the month in which they are incurred and the balance in the following month.
Selling and administrative expenses will amount to $100,000 per month, paid in the month
incurred. The accounts payable balance on March 31 totals $190,000, which will be paid in
April.
All units are sold on account (as credit sales) for $14 each. There are no cash sales. Cash
collections from sales are budgeted at 60% in the month of sale, 30% in the month following the
month of sale, and the remaining 10% in the second month following the month of sale.
Accounts receivable on April 1 totaled $500,000 and the full amount is expected to be collected
by end of April.
Required:
a. Prepare a schedule for each month showing budgeted cash disbursements for the Clay
Company.
b. Prepare a schedule for each month showing budgeted cash receipts for the Clay
Company.
year as follows:
April May June
Sales 50,000 40,000 60,000
Production 60,000 50,000 50,000
Cash-related production costs are budgeted at $5 per unit produced. Of these production costs,
40% are paid in the month in which they are incurred and the balance in the following month.
Selling and administrative expenses will amount to $100,000 per month, paid in the month
incurred. The accounts payable balance on March 31 totals $190,000, which will be paid in
April.
All units are sold on account (as credit sales) for $14 each. There are no cash sales. Cash
collections from sales are budgeted at 60% in the month of sale, 30% in the month following the
month of sale, and the remaining 10% in the second month following the month of sale.
Accounts receivable on April 1 totaled $500,000 and the full amount is expected to be collected
by end of April.
Required:
a. Prepare a schedule for each month showing budgeted cash disbursements for the Clay
Company.
b. Prepare a schedule for each month showing budgeted cash receipts for the Clay
Company.
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