Using sensitivity analysis in budgeting
Refer to the Berry’s schedule of cash receipts from customers that you prepared in Short Exercise S22-9. Now assume that Berry’s sales are collected as follows:
60% in the month of the sale
20% in the month after the sale
18% two months after the sale
2% never collected
Prepare a revised schedule of cash receipts for January and February.
Total cash receipts from the customers is $572,440 in the month of January and $423,060 in the month of February.
A systematic schedule created to record the money received from a customer is called a cash receipt schedule.
Total budgeted sales
Cash receipts from customers:
60 % in the month of sale
20% in the month after sale
18% two months after sales
Total cash receipts from customers
Completing a comprehensive budgeting problem—merchandising company Alliance Printing Supply of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:
As Alliance Printing Supply’s controller, you have assembled the following additional information:
a. April dividends of $7,000 were declared and paid.
b. April capital expenditures of $16,300 budgeted for cash purchase of equipment.
c. April depreciation expense, $1,000.
d. Cost of goods sold, 40% of sales.
e. Desired ending inventory for April is $22,400.
f. April selling and administrative expenses include salaries of $37,000, 30% of which will be paid in cash and the remainder paid next month.
g. Additional April selling and administrative expenses also include miscellaneous expenses of 10% of sales, all paid in April.
h. April budgeted sales, $89,000, 80% collected in April and 20% in May.
i. April cash payments of March 31 liabilities incurred for March purchases of inventory, $8,600.
j. April purchases of inventory, $8,600 for cash and $37,400 on account. Half the credit purchases will be paid in April and half in May.
1. Prepare the sales budget for April.
2. Prepare the inventory, purchases, and cost of goods sold budget for April.
3. Prepare the selling and administrative expense budget for April.
4. Prepare the schedule of cash receipts from customers for April.
5. Prepare the schedule of cash payments for selling and administrative expenses for April.
6. Prepare the cash budget for April. Assume the company does not use short-term financing to maintain a minimum cash balance.
7. Prepare the budgeted income statement for April.
8. Prepare the budgeted balance sheet at April 30, 2018.
Preparing an operating budget—sales budget
Yarbrough Company manufactures T-shirts printed with tourist destination logos. The following table shows sales prices and projected sales volume for the summer months:
Projected Sales in Units T-Shirt Sizes Sales Price June July August Youth $ 7 575 500 525 Adult—regular 17 625 900 825 Adult—oversized 18 400 500 475 Prepare a sales budget for Yarbrough Company for the three months.
Preparing a financial budget—cash budget
You recently began a job as an accounting intern at Reilly Golf Park. Your first task was to help prepare the cash budget for April and May. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a paper copy. You ran a program to salvage bits of data from the budget file. After entering the following data in the budget, you may have just enough information to reconstruct the budget.
Reilly Golf Park eliminates any cash deficiency by borrowing the exact amount needed from First Street Bank, where the current interest rate is 6% per year. Reilly Golf Park first pays interest on its outstanding debt at the end of each month. The company then repays all borrowed amounts at the end of the month with any excess cash above the minimum required but after paying monthly interest expenses. Reilly does not have any outstanding debt on April 1.
Complete the cash budget. Round interest expense to the nearest whole dollar.
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