Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $7,500, accounts receivable of $538,000, inventories of $367,120, and accounts payable of $132,450. The budget is to be based on the following assumptions: Sales Each month’s sales are billed on the last day of the month. Customers are allowed a 2% discount if payment is made within 10 days after the billing date. Receivables are booked gross. 60% of the billings are collected within the discount period, 20% are collected by the end of the month, 16% are collected by the end of the second month, and 4% prove uncollectible. Purchases 55% of all purchases of materials and selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. Each month’s ending inventory in units is equal to 115% of the next month’s units of sales. The cost of each unit of inventory is $26. Selling, general, and administrative expenses, of which $3,500 is depreciation, are equal to 25% of the current month’s sales. Actual and projected sales are as follows: Dollars Units May $ 537,500 10750 June $ 575,000 11500 July $ 540,000 10800 August $ 515,000 10300 September $ 545,000 10900 October $ 562,500 11250 Question: Polk's budgeted cash disbursements during August are: (answer is supposed to be $404,852. Need help understanding step by step the solution).
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.
Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $7,500,
Sales
Each month’s sales are billed on the last day of the month. Customers are allowed a 2% discount if payment is made within 10 days after the billing date. Receivables are booked gross. 60% of the billings are collected within the discount period, 20% are collected by the end of the month, 16% are collected by the end of the second month, and 4% prove uncollectible.
Purchases
55% of all purchases of materials and selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. Each month’s ending inventory in units is equal to 115% of the next month’s units of sales. The cost of each unit of inventory is $26. Selling, general, and administrative expenses, of which $3,500 is
Actual and projected sales are as follows:
| Dollars | Units | |||
| May | $ 537,500 | 10750 | ||
| June | $ 575,000 | 11500 | ||
| July | $ 540,000 | 10800 | ||
| August | $ 515,000 |
10300 |
||
| September | $ 545,000 | 10900 | ||
| October | $ 562,500 | 11250 | ||
Question: Polk's budgeted cash disbursements during August are: (answer is supposed to be $404,852. Need help understanding step by step the solution).
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please show all work for calculations. Where $11,845 and $12,535 come from?
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