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Concept Introduction:
Sales Budget-
A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.
Requirement 1-
To prepare:
Sales budget
Answer to Problem 14.24P
| Freese Inc. | ||||
| Sales budget | ||||
| | | | | |
| | October | November | December | Quarter |
| Sales in units | 12,000 | 14,000 | 20,000 | 46,000 |
| Selling price per unit | $60 | $60 | $60 | $60 |
| Dollar sales value($) | $720,000 | $840,000 | $1,200,000 | $2,760,000 |
Explanation of Solution
Given,
- Sales units for October = 12,000
- Sales units for November = 14,000
- Sales units for December = 20,000
- Selling price per unit = $60
Dollar sales value for each month is calculated as follows-
Conclusion:
Thus, the sales budget has been prepared.
Concept Introduction:
Schedule of expected cash collection-
Schedule of expected cash collection is a schedule which represents all the cash collections from sales during a period. It is a part of
Requirement 2-
To prepare:
Schedule of expected cash collection
Answer to Problem 14.24P
| Freese Inc. | ||||
| Schedule of expected cash collection | ||||
| | | | | |
| Cash collections from- | October | November | December | Total |
| September sales | 499,200 | 499,200 | ||
| October sales | 230,400 | 460,800 | 691,200 | |
| November sales | 268,800 | 537,600 | 806,400 | |
| December sales | 384,000 | 384,000 | ||
| Total cash collections | $729,600 | $729,600 | $921,600 | 2,380,800 |
Explanation of Solution
Given, Sales (Calculated in requirement 1)
- October sales = $720,000
- November sales = $840,000
- December sales = $1,200,000 October-
Total cash collections of October-
November-
Total cash collections of November-
December-
Total cash collections of December-
Conclusion:
Thus, schedule of cash collections is prepared.
Concept Introduction:
Production Budget-
Production budget is a budget which shows the number of units to be produced or manufactured during a period of time.
Requirement 3-
To prepare:
Production Budget
Answer to Problem 14.24P
| Freese Inc.. | ||||
| Production budget | ||||
| | | | | |
| | October | November | December | Total |
| | | | | |
| Quantity to be sold | 12,000 | 14,000 | 20,000 | 46,000 |
| Desired ending inventory of finished goods | 5,600 | 8,000 | 3,600 | 3,600 |
| Goods available for sale | 17,600 | 22,000 | 23,600 | 49,600 |
| Beginning inventory of finished goods | (4,800) | (5,600) | (8,000) | (4,800) |
| Units to be produced | 12,800 | 16,400 | 15,600 | 44,800 |
Explanation of Solution
Given,
Beginning inventory of October − 4,800 units
Quantity to be sold-
- October − 12,000 units
- November − 14,000 units
- December − 20,000 units
- January − 9,000 units
October-
November-
December-
Beginning inventory of finished goods
- Ending inventory of finished goods of the previous month shall be the beginning inventory of finished goods
- October − 4,800 units
- November − 5,600 units
- December − 8,000 units Now, we need to calculate units to be produced-
Conclusion:
Thus, Production budget is prepared.
Concept Introduction:
Materials purchase budget-
Material purchase budget is a budget which shows the material to be purchased during a period of time in order to fulfill the requirement of production budget.
Requirement 4-
To prepare:
Material purchase budget
Answer to Problem 14.24P
| Freese Inc. | ||||
| Material purchase budget | ||||
| | | | | |
| | October | November | December | Total |
| Budgeted production (units) | 12,800 | 16,400 | 15,600 | 44,800 |
| Material requirements per unit (pounds) | 5 | 5 | 5 | 5 |
| Quantity of raw materials to be used in production | 64,000 | 82,000 | 78,000 | 224,000 |
| Add: Desired ending inventory of raw materials | 24,600 | 23,400 | 14,100 | 14,100 |
| Raw materials available for use | 88,600 | 105,400 | 92,100 | 238,100 |
| Less: Beginning inventory of raw materials | (19,200) | (24,600) | (23,400) | (19,200) |
| Purchase of raw materials | 69,400 | 80,800 | 68,700 | 218,900 |
Explanation of Solution
Given,
- Production Budget = Calculated in Req.3
- Material requirements per unit= 5
- Beginning inventory of raw materials of October = 19,200 pounds Quantity of raw materials to be used in production-
Desired ending inventory of raw materials = 30%*Next month's Quantity of raw materials to be used in production
October-
November-
December-
Beginning inventory of raw materials
- Ending inventory of raw materials of the previous month shall be the beginning inventory of raw materials
- October − 19,200
- November − 24,600
- December − 23,400 Now, we need to calculate units to be purchased-
Conclusion:
Thus, Purchase budget is prepared.
Concept Introduction:
Schedule of cash payments for material-
Schedule of expected cash payment is a schedule which represents all the cash payments to suppliers for purchases during a period. It is a part of master budget. It is prepared after preparing of purchase budget but before preparing of cash budget.
Requirement 5-
To prepare:
Schedule of expected cash payment
Answer to Problem 14.24P
| Freese Inc. | ||||
| Schedule of expected cash payment | ||||
| | | | | |
| Cash payments for- | October | November | December | Total |
| September purchases | 75,960 | 75,960 | ||
| October purchases | 194,320 | 83,280 | 277,600 | |
| November purchases | 226,240 | 96,960 | 323,200 | |
| December purchases | 192,360 | 192,360 | ||
| Total cash payments | 270,280 | 309,520 | 289,320 | 869,120 |
Explanation of Solution
Given,
- Cash payments for September purchases- $75,960
- Purchases (Calculated in req.4) October − 69,400
- Cost per pound of raw material = $4 October-
November − 80,800
December − 68,700
Total cash payments for October-
November-
Total cash payments for November-
December-
Total cash payments for December-
Conclusion:
Thus, Schedule of expected cash payment is prepared.
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Chapter 14 Solutions
Accounting: What the Numbers Mean
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