Sally Company specializes in office chairs. The company is in the process of preparing detailed budgets for the next few months. Month Budgeted Sales (Units) Oct 2021 500 Nov 2021 800 Dec 2021 1,000 Jan 2022 900 All sales are on account with no bad debts. The company’s experience with cash collection is that 70% of each month’s sales are collected during the same month as the sale. The remaining 30% of sales is collected in the month after the sale. Budgeted sales for September 2021 is $50,000. The company buys the chairs for $50 each and sells them for $120 each. Its inventory policy requires ending inventory to be 30% of next month’s budgeted sales. Interpret the above and prepare the following budgets, showing details for each of the months from October 2021 to December 2021: (a) Cash receipts budget. (b) Merchandise purchases budget.
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.
Sally Company specializes in office chairs. The company is in the process of preparing detailed budgets for the next few months.
| Month | Budgeted Sales (Units) |
| Oct 2021 | 500 |
| Nov 2021 | 800 |
| Dec 2021 | 1,000 |
| Jan 2022 | 900 |
All sales are on account with no
collection is that 70% of each month’s sales are collected during the same month as the
sale. The remaining 30% of sales is collected in the month after the sale. Budgeted sales
for September 2021 is $50,000.
The company buys the chairs for $50 each and sells them for $120 each. Its inventory
policy requires ending inventory to be 30% of next month’s budgeted sales.
Interpret the above and prepare the following budgets, showing details for each of the
months from October 2021 to December 2021:
(a)
(b) Merchandise purchases budget.
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