Digital Ltd is a retailer of a popular digital watch and provides you with the following information for the preparation of its 1st quarter budget: July - September. Budgeted sales are as follows: Month Sales ($) Units sold May 250,000 2,500 June 280,000 2,800 July 350,000 3,500 August 400,000 4,000 September 300,000 3,000 October 360,000 3,600 Additional information: i) Purchases are budgeted at $5.00 per unit and are paid for in full in the month after purchase. ii) Ending inventory must equal 40% of of the next month's sales. v) Sales (which are all on credit) are collected as follows: 60% in the month of sale; 30% in the month after the sale; 5% in the second month after the sale. v) The balance in the bank account as at 30 June is $10,000. Required: a) Prepare a purchases budget (in units and $) for the 1st quarter. (Purchases are based on expected sales).
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.
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