Management Accounting Group 11: Hằng Anh, Phương Thúy, Thanh Tâm, Tuấn Minh

Case 8-23
1. Sales budget: April May June Quarter
Budgeted sales in units. . . 35,000 45,000 60,000 140,000
Selling price per unit.......    ×   $8    ×   $8     ×   $8       ×    $8
Total sales........................ $280,000 $360,000 $480,000 $1,120,000

b. Schedule of expected cash collections:

February sales................. $ 48,000 $    48,000
March sales..................... 112,000 $ 56,000 168,000
April sales....................... 70,000 140,000 $ 70,000 280,000
May sales........................ 90,000 180,000 270,000
June sales........................                              120,000     120,000
Total cash collections...... $230,000 $286,000 $370,000 $  886,000

Merchandise purchases budget:

Budgeted sales in units. . . 35,000 45,000 60,000 140,000
Add budgeted ending
inventory*....................    40,500    54,000    36,000      36,000
Total needs...................... 75,500 99,000 96,000 176,000
Less beginning inventory    31,500    40,500    54,000      31,500
Required unit purchases..   44,000 58,500 42,000 144,500
Unit cost..........................     ×   $5     ×   $5     ×   $5      ×    $5
Required dollar
purchases...................... $220,000 $292,500 $210,000 $  722,500
*90% of the next month’s sales in units.

d. Budgeted cash disbursements for merchandise purchases:

April May June Quarter
March purchases........ $ 85,750 $   85,750
April purchases.......... 110,000 $110,000 220,000
May purchases........... 146,250 $146,250 292,500
June purchases...........                              105,000     105,000
Total cash
disbursements......... $195,750 $256,250 $251,250 $  703,250
Management Accounting Group 11: Hằng Anh, Phương Thúy, Thanh Tâm, Tuấn Minh

2. Cravat Sales Company

Management Accounting Group 11: Hằng Anh, Phương Thúy, Thanh Tâm, Tuấn Minh

Cash Budget
For the Three Months Ending June 30

April May June Quarter

Cash balance, beginning....... $ 14,000 $ 10,250 $ 10,000 $ 14,000
Add receipts from customers
(Part 1 b.)...........................  230,000  286,000  370,000  886,000
Total cash available..............  244,000  296,250  380,000  900,000
Less disbursements:
Purchase of inventory
(Part 1 d.)........................ 195,750 256,250 251,250 703,250
Sales commissions............ 35,000 45,000 60,000 140,000
Salaries and wages............ 22,000 22,000 22,000 66,000
Utilities.............................. 14,000 14,000 14,000 42,000
Miscellaneous.................... 3,000 3,000 3,000 9,000
Dividends paid.................. 12,000 0 0 12,000
Land purchases..................           0    25,000           0    25,000
Total disbursements..............  281,750  365,250  350,250  997,250
Excess (deficiency) of
receipts over
disbursements....................  (37,750)  (69,000)    29,750  (97,250)
Financing:
Borrowings........................ 48,000 79,000 0 127,000
Repayments*..................... 0 0 (16,000) (16,000)
Interest*.............................            0            0    (3,020)    (3,020)
Total financing......................    48,000    79,000  (19,020)   107,980
Cash balance, ending............ $ 10,250 $ 10,000 $ 10,730 $ 10,730
* This is the maximum amount (in increments of $1,000) that the company
could repay to the bank and still have at least a $10,000 ending balance.
** $48,000 × 1% × 3 = $1,440
$79,000 × 1% × 2 =  1,580
Total interest = $3,020
Management Accounting Group 11: Hằng Anh, Phương Thúy, Thanh Tâm, Tuấn Minh

3. Cravat Sales Company

Budgeted Income Statement
For the Three Months Ended June 30

Sales revenue (Part 1 a.).............................. $1,120,000

Variable expenses:
Cost of goods sold
(140,000 ties @ $5 per tie)................... $700,000
Commissions
(140,000 ties @ $1 per tie)...................  140,000     840,000
Contribution margin.................................... 280,000
Fixed expenses:
Wages and salaries................................... 66,000
Utilities..................................................... 42,000
Insurance expired..................................... 3,600
Depreciation............................................. 4,500
Miscellaneous..........................................      9,000      125,100
Net operating income.................................. 154,900
Less interest expense...................................         3,020
Net income.................................................. $   151,880

4. Cravat Sales Company

Budgeted Balance Sheet
June 30

Assets
Cash (Part 2)......................................................................... $ 10,730
Accounts receivable (see below).......................................... 450,000
Inventory (36,000 ties @ $5 per tie)..................................... 180,000
Unexpired insurance ($14,400 – $3,600)............................. 10,800
Fixed assets, net of depreciation
($172,700 + $25,000 – $4,500).........................................  193,200
Total assets............................................................................ $844,730

Liabilities and Equity

Accounts payable, purchases
(50% × $210,000 from Part 1 c.)....................................... $105,000
Dividends payable................................................................ 12,000
Management Accounting Group 11: Hằng Anh, Phương Thúy, Thanh Tâm, Tuấn Minh

Loans payable, bank (Part 2; $127,000 – $16,000).............. 111,000

Capital stock, no par............................................................. 300,000
Retained earnings (see below)..............................................  316,730
Total liabilities and equity..................................................... $844,730

Accounts receivable at June 30:

25% × May sales of $360,000......................... $ 90,000
75% × June sales of $480,000.........................  360,000
Total................................................................. $450,000

Retained earnings at June 30:

Balance, March 31........................................... $176,850
Add net income (Part 3)...................................  151,880
Total................................................................. 328,730
Less dividends declared...................................    12,000
Balance, June 30.............................................. $316,730