Following are the budgeted income statements for the second quarter of 2022 for SeaTech Incorporated: Sales Cost of goods sold* Gross profit Operating expensest Operating income April $ 280,000 192,000 $ 88,000 44,000 $ 44,000 May $ 340,000 228,000 $ 112,000 50,000 $ 62,000 June $ 380,000 252,000 $ 128,000 54,000 $ 74,000 * Includes all product costs (i.e., direct materials, direct labor, and manufacturing overhead). † Includes all period costs (i.e., selling, general, and administrative expenses). The company expects about 30% of sales to be cash transactions. Of sales on account, 60% are expected to be collected in the first month after the sale is made, and 40% are expected to be collected in the second month after sale. Depreciation, insurance, and property taxes represent $24,000 of the estimated monthly cost of goods sold and $16,000 of the estimated monthly operating expenses. The annual insurance premium is paid in January, and the annual property taxes are paid in August. Of the remainder of the cost of goods sold and operating expenses, 80% are expected to be paid in the month in which they are incurred, and the balance is expected to be paid in the following month. Current assets as of April 1, 2022, consist of cash of $28,000 and accounts receivable of $299,600 ($209,720 from March credit sales and $89,880 from February credit sales). Current liabilities as of April 1 consist of $36,000 of accounts payable for product costs incurred in March; $9,200 of accrued liabilities for operating expenses incurred in March; and a $80,000, 11%, 120-day note payable that is due on April 17, 2022. An estimated income tax payment of $80,000 will be made in May. The regular quarterly dividend of $32,000 is expected to be declared in May and paid in June. Capital expenditures amounting to $34,400 will be made in April.
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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