You are the managerial accountant at Reliable Company and are part of the organization’s budgeting committee. You have been assigned to support the marketing department and manage its master budget. The marketing department is responsible for the following: • Managing the firm's marketing • Hiring subcontractors • Selling the consulting expertise to smaller outside firms The department's expenses are as follows: • Salaries and benefits of $48,000/month • Web site operations of $21,000/ month • Online advertising expenses of $15,000/month • Miscellaneous expenses of $3,500/month The sales forecast for its consulting services are as follows: • April: $190,000 • May: $200,000 • June: $205,000 The department pays a sales commission of 5%, and this is paid in the following month. Subcontractor expenses are estimated at 45% of sales and are paid the month after they are billed. Consulting fees are collected 20% in the month of sale, 70% in the following month, and 10% in the second month following sale. Market Department Master Budget – June (complete the below schedules) June Consulting Revenues (Chapter 20 - PAGE 1005) Less: Commissions Less: Subcontractor expenses Net revenues Expenses Salaries and benefits Web site operations Online advertising expenses Other misc. expenses Total expenses Net department expenses Expected Cash Collections (Chapter 20 – PAGE 1008-1009) June collections on account: April sales May sales June sales Total cash collections Expected Cash Disbursements (Chapter 20 – PAGE 1009-1010) Salaries and benefits Web site operations Other misc. expenses Online advertising expenses Sales commissions (5% of sales) Cost of sales (45% of sales) Total cash disbursements Net impact on cash

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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You are the managerial accountant at Reliable Company and are part of the organization’s budgeting committee. You have been assigned to support the marketing department and manage its master budget. The marketing department is responsible for the following: • Managing the firm's marketing • Hiring subcontractors • Selling the consulting expertise to smaller outside firms The department's expenses are as follows: • Salaries and benefits of $48,000/month • Web site operations of $21,000/ month • Online advertising expenses of $15,000/month • Miscellaneous expenses of $3,500/month The sales forecast for its consulting services are as follows: • April: $190,000 • May: $200,000 • June: $205,000 The department pays a sales commission of 5%, and this is paid in the following month. Subcontractor expenses are estimated at 45% of sales and are paid the month after they are billed. Consulting fees are collected 20% in the month of sale, 70% in the following month, and 10% in the second month following sale. Market Department Master Budget – June (complete the below schedules) June Consulting Revenues (Chapter 20 - PAGE 1005) Less: Commissions Less: Subcontractor expenses Net revenues Expenses Salaries and benefits Web site operations Online advertising expenses Other misc. expenses Total expenses Net department expenses Expected Cash Collections (Chapter 20 – PAGE 1008-1009) June collections on account: April sales May sales June sales Total cash collections Expected Cash Disbursements (Chapter 20 – PAGE 1009-1010) Salaries and benefits Web site operations Other misc. expenses Online advertising expenses Sales commissions (5% of sales) Cost of sales (45% of sales) Total cash disbursements Net impact on cash

A
1
Marketing Department Master Budget
June
3
Consulting Revenues
4
Less: Commissions
5
Less: Subcontractor expenses
Net revenues
7
8
Expenses
9.
Salaries and benefits
10
Web site operations
11
Online advertising expenses
12
Other misc. expenses
13
Total expenses
14
Net department expenses
15
16
17
Expected Cash Collections
18
June collections on account:
19
April sales
20
May sales
21
June sales
22
Total cash collections
23
24
Expected Cash Disbursements
25
Salaries and benefits
26
Web site operations
27
Other misc. expenses
28
Online advertising expenses
29
Sales commissions (5% of sales)
30
Cost of sales (45% of sales)
31
Total cash disbursements
32

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