Gilmore Corp. is preparing its operations budget for December 2021. The datafrom the previous year is presented as follows: Gilmore Corporation IncomeStatement For the year ended December 2020Sales (150,000 units) - 3,750,000.00Cost of Goods Sold - 1,912,500.00Gross Profit - 1,837,500.00Operating expenses (including rent and depreciation of100,000 and 150,000) - 550,000.00Net Income - 1,287,500.00Gilmore Corp is looking to adjust the budget for the coming year as follows:1. Because of the on-going pandemic, Gilmore is forecasting a 10% decrease inthe sales every quarter starting the first quarter.2. Sales discounts and allowances are estimated to be 1.5% every quarter.3. Gilmore is planning to maintain an ending inventory of 7,500 for the first twoquarters, and 6,500 to the other two quarters. The planned ending inventoryfor the first two quarters is 1,000 less than the ending inventory from theprevious year.4. Gilmore's outputs contain 3 units of raw materials costing P5.50, and takeabout 2.5 labor hours to finish. Each labor hour costs P4.75. Gilmore maintainsan ending raw materials inventory at 3% of budgeted units to be produced.5. Variable overhead costs are currently at 3.75 and is expected to increase by10% each quarter.6. Fixed overhead costs remain the same. 7. Selling and administrative expensesamounts to 175,000.Required:1. Prepare and present the whole operations budget of Gilmore Corp.2. Prepare and present the budgeted income statement per quarter of GilmoreCorp. for 2021.

Operations budget of Gilmore Corp needs to be prepared Based on the data given Sale price per unit…

Answered: Required: 1. Prepare and present the…

Required: 1. Prepare and present the whole operations budget of Gilmore Corp. 2. Prepare and present the budgeted income statement per quarter of Gilmore Corp. for 2021.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

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.

Question

Gilmore Corp. is preparing its operations budget for December 2021. The data
from the previous year is presented as follows: Gilmore Corporation Income
Statement For the year ended December 2020
Sales (150,000 units) - 3,750,000.00
Cost of Goods Sold - 1,912,500.00
Gross Profit - 1,837,500.00
Operating expenses (including rent and depreciation of
100,000 and 150,000) - 550,000.00
Net Income - 1,287,500.00
Gilmore Corp is looking to adjust the budget for the coming year as follows:
1. Because of the on-going pandemic, Gilmore is forecasting a 10% decrease in
the sales every quarter starting the first quarter.
2. Sales discounts and allowances are estimated to be 1.5% every quarter.
3. Gilmore is planning to maintain an ending inventory of 7,500 for the first two
quarters, and 6,500 to the other two quarters. The planned ending inventory
for the first two quarters is 1,000 less than the ending inventory from the
previous year.
4. Gilmore's outputs contain 3 units of raw materials costing P5.50, and take
about 2.5 labor hours to finish. Each labor hour costs P4.75. Gilmore maintains
an ending raw materials inventory at 3% of budgeted units to be produced.
5. Variable overhead costs are currently at 3.75 and is expected to increase by
10% each quarter.
6. Fixed overhead costs remain the same. 7. Selling and administrative expenses
amounts to 175,000.
Required:
1. Prepare and present the whole operations budget of Gilmore Corp.
2. Prepare and present the budgeted income statement per quarter of Gilmore
Corp. for 2021.

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