Chapter 14, Problem 22P

Problem 7-22A Preparing budgets with multiple products

Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 5 percent for peaches and 10 percent for oranges. The current year’s sales revenue data follow:

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter	Total
Peaches	$ 80,000	$100,000	$160,000	$140,000	$ 480,000
Oranges	200,000	225,000	285,000	190,000	900,000
Total	$280,000	$325,000	$445,000	$330,000	$1,380,000

Based on the company’s past experience, cost of goods sold is usually 60 percent of sales revenue. Company policy is to keep 10 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (Hint: Use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)

Required

1. a. Prepare the company’s sales budget for the next year for each quarter by individual product.
2. b. If the selling and administrative expenses are estimated to be $350,000, prepare the company’s budgeted annual income statement.
3. c. Ms. Jasper estimates next year’s ending inventory will be $10,000 for peaches and $20,000 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.