The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year: March April Sales $450,000 $520,000 Manufacturing costs 290,000 350,000 Selling and administrative expenses 41,400 46,400 Capital additions 250,000 - The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full in the month of the sale and the remainder in the month following the sale. One-fourth of the manufacturing costs are paid in the month in which they are incurred and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the monthly selling and administrative expenses. Insurance is paid in February, and property taxes are paid yearly in September. A $40,000 installment on income taxes is to be paid in April. Of the remainder of the selling and administrative expenses, one-half is to be paid in the month in which they are incurred and the balance in the following month. Capital additions of $250,000 are paid in March. Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for selling and administrative expenses). Management desires to maintain a minimum cash balance of $25,000. Prepare a monthly cash budget for March and April. If an amount box does not require an entry, leave it blank. Use the minus sign to indicate negative numbers or decrease in cash. Calico Dreams Company Cash Budget For the Two Months Ending April 30 March April Estimated cash receipts from: Cash sales $fill in the blank 1 $fill in the blank 2 Collections of accounts receivable fill in the blank 3 fill in the blank 4 Total cash receipts $fill in the blank 5 $fill in the blank 6 Estimated cash payments for: Manufacturing costs $fill in the blank 7 $fill in the blank 8 Selling and administrative expenses fill in the blank 9 fill in the blank 10 Capital additions fill in the blank 11 fill in the blank 12 Income taxes fill in the blank 13 fill in the blank 14 Total cash payments $fill in the blank 15 $fill in the blank 16 Cash increase (decrease) $fill in the blank 17 $fill in the blank 18 Cash balance at beginning of month fill in the blank 19 fill in the blank 20 Cash balance at end of month $fill in the blank 21 $fill in the blank 22 Minimum cash balance fill in the blank 23
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 treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year:
| March | April | ||
| Sales | $450,000 | $520,000 | |
| 290,000 | 350,000 | ||
| Selling and administrative expenses | 41,400 | 46,400 | |
| Capital additions | 250,000 | - |
The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full in the month of the sale and the remainder in the month following the sale. One-fourth of the manufacturing costs are paid in the month in which they are incurred and the other three-fourths in the following month.
Current assets as of March 1 are composed of cash of $45,000 and
Prepare a monthly
| Calico Dreams Company | ||
| Cash Budget | ||
| For the Two Months Ending April 30 | ||
| March | April | |
| Estimated cash receipts from: | ||
| Cash sales | $fill in the blank 1 | $fill in the blank 2 |
| Collections of accounts receivable | fill in the blank 3 | fill in the blank 4 |
| Total cash receipts | $fill in the blank 5 | $fill in the blank 6 |
| Estimated cash payments for: | ||
| Manufacturing costs | $fill in the blank 7 | $fill in the blank 8 |
| Selling and administrative expenses | fill in the blank 9 | fill in the blank 10 |
| Capital additions | fill in the blank 11 | fill in the blank 12 |
| Income taxes | fill in the blank 13 | fill in the blank 14 |
| Total cash payments | $fill in the blank 15 | $fill in the blank 16 |
| Cash increase (decrease) | $fill in the blank 17 | $fill in the blank 18 |
| Cash balance at beginning of month | fill in the blank 19 | fill in the blank 20 |
| Cash balance at end of month | $fill in the blank 21 | $fill in the blank 22 |
| Minimum cash balance | fill in the blank 23 | fill in the blank 24 |
| Excess (deficiency) | $fill in the blank 25 | $fill in the blank 26 |
Cash sales :
March : $450,000 *35% = $157,500
April : $520,000 * 35% = $182,000
Collections of accounts receivable
March : ($450,000 *0.65 *0.80) + $51,000 = $285,000
April : ($520,000 *0.65 *0.80) + ($450,000 *0.65 * 0.20) = $328,900
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