The controller of Feinberg Company is gathering data to prepare the cash budget for July. Heplans to develop the budget from the following information:a. Of all sales, 40% are cash sales.b. Of credit sales, 45% are collected within the month of sale. Half of the credit salescollected within the month receive a 2% cash discount (for accounts paid within 10 days).Thirty percent of credit sales are collected in the following month; remaining credit salesare collected the month thereafter. There are virtually no bad debts.c. Sales for the second two quarters of the year follow. (Note: The first 3 months are actualsales, and the last 3 months are estimated sales.) SalesApril $ 450,000May 580,000June 900,000July 1,140,000August 1,200,000September 1,134,000d. The company sells all that it produces each month. The cost of raw materials equals 26%of each sales dollar. The company requires a monthly ending inventory of raw materialsequal to the coming month’s production requirements. Of raw materials purchases, 50% ispaid for in the month of purchase. The remaining 50% is paid for in the following month.e. Wages total $105,000 each month and are paid in the month incurred.f. Budgeted monthly operating expenses total $376,000, of which $45,000 is depreciationand $6,000 is expiration of prepaid insurance (the annual premium of $72,000 is paid onJanuary 1).g. Dividends of $130,000, declared on June 30, will be paid on July 15.h. Old equipment will be sold for $25,200 on July 4.i. On July 13, new equipment will be purchased for $173,000.j. The company maintains a minimum cash balance of $20,000.k. The cash balance on July 1 is $27,000.Required:Prepare a cash budget for July. Give a supporting schedule that details the cash collections fromsales.
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.
The controller of Feinberg Company is gathering data to prepare the
plans to develop the budget from the following information:
a. Of all sales, 40% are cash sales.
b. Of credit sales, 45% are collected within the month of sale. Half of the credit sales
collected within the month receive a 2% cash discount (for accounts paid within 10 days).
Thirty percent of credit sales are collected in the following month; remaining credit sales
are collected the month thereafter. There are virtually no bad debts.
c. Sales for the second two quarters of the year follow. (Note: The first 3 months are actual
sales, and the last 3 months are estimated sales.)
Sales
April $ 450,000
May 580,000
June 900,000
July 1,140,000
August 1,200,000
September 1,134,000
d. The company sells all that it produces each month. The cost of raw materials equals 26%
of each sales dollar. The company requires a monthly ending inventory of raw materials
equal to the coming month’s production requirements. Of raw materials purchases, 50% is
paid for in the month of purchase. The remaining 50% is paid for in the following month.
e. Wages total $105,000 each month and are paid in the month incurred.
f. Budgeted monthly operating expenses total $376,000, of which $45,000 is depreciation
and $6,000 is expiration of prepaid insurance (the annual premium of $72,000 is paid on
January 1).
g. Dividends of $130,000, declared on June 30, will be paid on July 15.
h. Old equipment will be sold for $25,200 on July 4.
i. On July 13, new equipment will be purchased for $173,000.
j. The company maintains a minimum cash balance of $20,000.
k. The cash balance on July 1 is $27,000.
Required:
Prepare a cash budget for July. Give a supporting schedule that details the cash collections from
sales.
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