Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the following sales: Quarter 1 $4,740,000 Quarter 2 5,860,000 Quarter 3 3,720,000 Quarter 4 8,580,000 In Shalimar’s experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are $5,410,000 and for the fourth quarter of the current year are $7,070,000.
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.
Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the following sales:
| Quarter 1 | $4,740,000 |
| Quarter 2 | 5,860,000 |
| Quarter 3 | 3,720,000 |
| Quarter 4 | 8,580,000 |
In Shalimar’s experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are $5,410,000 and for the fourth quarter of the current year are $7,070,000.
Required:
Question Content Area
1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year.
| Quarter | Cash Sales | Credit Sales |
| 3, current year | $fill in the blank 9d2fe401a04bf88_1 | $fill in the blank 9d2fe401a04bf88_2 |
| 4, current year | fill in the blank 9d2fe401a04bf88_3 | fill in the blank 9d2fe401a04bf88_4 |
| 1, next year | fill in the blank 9d2fe401a04bf88_5 | fill in the blank 9d2fe401a04bf88_6 |
| 2, next year | fill in the blank 9d2fe401a04bf88_7 | fill in the blank 9d2fe401a04bf88_8 |
| 3, next year | fill in the blank 9d2fe401a04bf88_9 | fill in the blank 9d2fe401a04bf88_10 |
| 4, next year | fill in the blank 9d2fe401a04bf88_11 | fill in the blank 9d2fe401a04bf88_12 |
Question Content Area
2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. If an amount is zero, enter "0".
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | |
|---|---|---|---|---|
| Cash sales | $fill in the blank 958d6b09d074040_1 | $fill in the blank 958d6b09d074040_2 | $fill in the blank 958d6b09d074040_3 | $fill in the blank 958d6b09d074040_4 |
| Received on account from: | ||||
| Quarter 3, current year | fill in the blank 958d6b09d074040_5 | |||
| Quarter 4, current year | fill in the blank 958d6b09d074040_6 | fill in the blank 958d6b09d074040_7 | ||
| Quarter 1, next year | fill in the blank 958d6b09d074040_8 | fill in the blank 958d6b09d074040_9 | fill in the blank 958d6b09d074040_10 | |
| Quarter 2, next year | fill in the blank 958d6b09d074040_11 | fill in the blank 958d6b09d074040_12 | fill in the blank 958d6b09d074040_13 | |
| Quarter 3, next year | fill in the blank 958d6b09d074040_14 | fill in the blank 958d6b09d074040_15 | ||
| Quarter 4, next year | fill in the blank 958d6b09d074040_16 | fill in the blank 958d6b09d074040_17 | fill in the blank 958d6b09d074040_18 | fill in the blank 958d6b09d074040_19 |
| Total cash receipts | $fill in the blank 958d6b09d074040_20 | $fill in the blank 958d6b09d074040_21 | $fill in the blank 958d6b09d074040_22 | $fill in the blank 958d6b09d074040_23 |
Question Content Area
3. What if the recession led Shalimar’s top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | |
|---|---|---|---|---|
| Cash sales | $fill in the blank 78cee703e00d010_1 | $fill in the blank 78cee703e00d010_2 | $fill in the blank 78cee703e00d010_3 | $fill in the blank 78cee703e00d010_4 |
| Received on account from: | ||||
| Quarter 4, current year | fill in the blank 78cee703e00d010_5 | |||
| Quarter 1, next year | fill in the blank 78cee703e00d010_6 | fill in the blank 78cee703e00d010_7 | ||
| Quarter 2, next year | fill in the blank 78cee703e00d010_8 | fill in the blank 78cee703e00d010_9 | ||
| Quarter 3, next year | fill in the blank 78cee703e00d010_10 | fill in the blank 78cee703e00d010_11 | ||
| Quarter 4, next year | fill in the blank 78cee703e00d010_12 | |||
| Total cash receipts | $fill in the blank 78cee703e00d010_13 | $fill in the blank 78cee703e00d010_14 | $fill in the blank 78cee703e00d010_15 | $fill in the blank 78cee703e00d010_16 |
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