Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January. Collections are expected to be 65% in the month of sale and 35% in the month following the sale. The cost of goods sold is 80% of sales. The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $21,100. Monthly depreciation is $21,000. Ignore taxes. Balance Sheet
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.
Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January.
Collections are expected to be 65% in the month of sale and 35% in the month following the sale.
The cost of goods sold is 80% of sales.
The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,100.
Monthly
Ignore taxes.
| Balance Sheet October 31 |
||
| Assets | ||
| Cash | $ | 25,000 |
| 77,000 | ||
| Merchandise inventory | 162,400 | |
| Property, plant and equipment, net of $624,000 |
1,026,000 | |
| Total assets | $ | 1,290,400 |
| Liabilities and |
||
| Accounts payable | $ | 239,000 |
| Common stock | 740,000 | |
| 311,400 | ||
| Total liabilities and stockholders' equity | $ | 1,290,400 |
The difference between cash receipts and cash disbursements for December would be:
The question is based on the concept of Cost Accounting.
In order to calculate the difference between cash receipts and cash disbursements for December we need to calculate them separately.
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