CZ is a merchandising company engaged in the purchasing and selling of electrical appliances. You as a management accountant have been asked to prepare a complete master budget for your store for June, July and August, so you gather the following data as of may 31, 2005: Cash $ 21,000 Accounts Payable $ 340,000 Inventory 300,000 Owners' equity 362,000 Accounts receivable 261,000 Total liabilities and Net furnitures and fixtures 120,000 owners' equity 702,000 Total Assets 702,000 Recent and projected sales April $200,000 May 250,000 June 500,000 July 300,000 August 300,000 September 200,000 Credit sales are 90% of total sales. Credit accounts are collected 80% in the month following the sale and 20% in the next following month. Assume that bad debts are negligible and can be ignored. The average gross profit on sales is 40%. The policy is to acquire enough inventories each month to equal the following month's projected sales. All purchases are paid for in the month following purchase. Salaries, wages and commissions average 20% of sales: all other variable expenses are 4% of sales. Fixed expenses for rent, property taxes, and miscellaneous payroll and other items are $ 40,000 monthly. Assume that these variable and fixed expenses require cash disbursements each month. Depreciation is $ 2,000 monthly. In June, $ 40,000 is going to be disbursed for fixtures acquired in May. The May 31 balance of accounts payable includes this amount.
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.
CZ is a merchandising company engaged in the purchasing and selling of electrical appliances. You as a
Cash $ 21,000 Accounts Payable $ 340,000
Inventory 300,000 Owners' equity 362,000
Net furnitures and fixtures 120,000 owners' equity 702,000
Total Assets 702,000
Recent and projected sales
April $200,000
May 250,000
June 500,000
July 300,000
August 300,000
September 200,000
Credit sales are 90% of total sales. Credit accounts are collected 80% in the month following the sale and 20% in the next following month. Assume that
The policy is to acquire enough inventories each month to equal the following month's projected sales. All purchases are paid for in the month following purchase.
Salaries, wages and commissions average 20% of sales: all other variable expenses are 4% of sales. Fixed expenses for rent, property taxes, and miscellaneous payroll and other items are $ 40,000 monthly. Assume that these variable and fixed expenses require cash disbursements each month.
In June, $ 40,000 is going to be disbursed for fixtures acquired in May. The May 31 balance of accounts payable includes this amount.
Assume that a minimum cash balance of $ 20,000 is to be maintained. Also assume that all borrowings are effective at the beginning of the month and all repayments are made at the end of the month of repayment. Interest is paid only at the repaying principal. Interest rate is 12% per annum: round interest computation to the nearest ten dollars.
Required
Prepare a
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