Crane Company’s budgeted sales and direct materials purchases are as follows. Budgeted Sales Budgeted D.M. Purchases January $274,000 $37,700 February 233,300 40,600 March 296,500 52,000 Crane’s sales are 30% cash and 70% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Crane’s purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase. (a) Prepare a schedule of expected collections from customers for March. (b) Prepare a schedule of expected payments for direct materials for March.
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.
Crane Company’s budgeted sales and direct materials purchases are as follows.
|
Budgeted Sales
|
Budgeted D.M. Purchases
|
||||
|---|---|---|---|---|---|
|
January
|
$274,000 | $37,700 | |||
|
February
|
233,300 | 40,600 | |||
|
March
|
296,500 | 52,000 |
Crane’s sales are 30% cash and 70% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Crane’s purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase.
(a)
Prepare a schedule of expected collections from customers for March.
(b)
Prepare a schedule of expected payments for direct materials for March.
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