Watson Company has projected sales and production in units for the second quarter of the coming year as follows: Sales Production April 55,000 65,000 May 45,000 55,000 June 65,000 55,000 Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $110,000 per month. The accounts payable balance on March 31 totals $193,000, which will be paid in April. All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $520,000 ($100,000 from February's sales and the remainder from March). Required: a) Calculate the budgeted cash disbursements for each month for Watson Company. b) Calculate the budgeted cash receipts for each month for Watson Company.
Watson Company has projected sales and production in units for the second quarter of the coming year as follows: Sales Production April 55,000 65,000 May 45,000 55,000 June 65,000 55,000 Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $110,000 per month. The accounts payable balance on March 31 totals $193,000, which will be paid in April. All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $520,000 ($100,000 from February's sales and the remainder from March). Required: a) Calculate the budgeted cash disbursements for each month for Watson Company. b) Calculate the budgeted cash receipts for each month for Watson Company.
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.
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Transcribed Image Text:Watson Company has projected sales and production in units for the second quarter of the coming year as
follows:
Sales
Production
April
55,000
65,000
May
45,000
55,000
June
65,000
55,000
Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 40% are
paid in the month in which they are incurred and the balance in the following month. Selling and
administrative expenses will amount to $110,000 per month. The accounts payable balance on March 31
totals $193,000, which will be paid in April.
All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the month
of sale, 30% in the month following the month of sale, and the remaining 10% in the second month
following the month of sale. Accounts receivable on April 1 totaled $520,000 ($100,000 from February's
sales and the remainder from March).
Required:
a) Calculate the budgeted cash disbursements for each month for Watson Company.
b) Calculate the budgeted cash receipts for each month for Watson Company.
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