The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: Line Item Description Sales September October November $103,000 $122,000 $166,000 Manufacturing costs 43,000 52,000 60,000 Selling and administrative expenses 36,000 37,000 63,000 Capital expenditures 40,000 The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $10,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of $39,000, marketable securities of $56,000, and accounts receivable of $114,600 ($24,600 from July sales and $90,000 from August sales). Sales on account for July and August were $82,000 and $90,000, respectively. Current liabilities as of September 1 include $10,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $15,000 will be made in October. Bridgeport's regular quarterly dividend of $10,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $38,000. 1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume 360 days per year for interest calculations.
The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: Line Item Description Sales September October November $103,000 $122,000 $166,000 Manufacturing costs 43,000 52,000 60,000 Selling and administrative expenses 36,000 37,000 63,000 Capital expenditures 40,000 The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent $10,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of $39,000, marketable securities of $56,000, and accounts receivable of $114,600 ($24,600 from July sales and $90,000 from August sales). Sales on account for July and August were $82,000 and $90,000, respectively. Current liabilities as of September 1 include $10,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of $15,000 will be made in October. Bridgeport's regular quarterly dividend of $10,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of $38,000. 1. Prepare a monthly cash budget and supporting schedules for September, October, and November. Assume 360 days per year for interest calculations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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
Transcribed Image Text:The controller of Bridgeport Housewares Inc. instructs you to prepare a
monthly cash budget for the next three months. You are presented with the
following budget information:
Line Item Description
Sales
September
October
November
$103,000
$122,000
$166,000
Manufacturing costs
43,000
52,000
60,000
Selling and administrative expenses
Capital expenditures
36,000
37,000
63,000
40,000
The company expects to sell about 10% of its merchandise for cash. Of sales
on account, 70% are expected to be collected in the month following the sale
and the remainder the following month (second month following sale).
Depreciation, insurance, and property tax expense represent $10,000 of the
estimated monthly manufacturing costs. The annual insurance premium is
paid in January, and the annual property taxes are paid in December. Of the
remainder of the manufacturing costs, 80% are expected to be paid in the
month in which they are incurred and the balance in the following month.
Current assets as of September 1 include cash of $39,000, marketable
securities of $56,000, and accounts receivable of $114,600 ($24,600 from
July sales and $90,000 from August sales). Sales on account for July and
August were $82,000 and $90,000, respectively. Current liabilities as of
September 1 include $10,000 of accounts payable incurred in August for
manufacturing costs. All selling and administrative expenses are paid in cash
in the period they are incurred. An estimated income tax payment of
$15,000 will be made in October. Bridgeport's regular quarterly dividend of
$10,000 is expected to be declared in October and paid in November.
Management desires to maintain a minimum cash balance of $38,000.
1. Prepare a monthly cash budget and supporting schedules for September,
October, and November. Assume 360 days per year for interest calculations.
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