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    Profit Planning and Budgeting

    Uploaded by

    Royce Maenard Estanislao
    The document contains 4 sections that provide budgeting and financial planning details for various companies: 1. Provides inventory levels and expense estimates for Kings Company to calculate cost of goods sold, manufacturing costs, factory overhead, and materials purchases. 2. Gives monthly sales data for Chronicles, Inc. and asks to calculate account receivable collections and balances based on the company's collection patterns. 3. Outlines sales projections and cost assumptions for Ezra merchandising to determine projected merchandise purchases for October and November. 4. Presents Nehemiah Company's sales estimates and expense budgets to calculate cash flows, purchases, cost of goods sold, and operating expenses for specific months.

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    © All Rights Reserved
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    Profit Planning and Budgeting

    Uploaded by

    Royce Maenard Estanislao
    396 views3 pages
    The document contains 4 sections that provide budgeting and financial planning details for various companies: 1. Provides inventory levels and expense estimates for Kings Company to calculate cost of goods sold, manufacturing costs, factory overhead, and materials purchases. 2. Gives monthly sales data for Chronicles, Inc. and asks to calculate account receivable collections and balances based on the company's collection patterns. 3. Outlines sales projections and cost assumptions for Ezra merchandising to determine projected merchandise purchases for October and November. 4. Presents Nehemiah Company's sales estimates and expense budgets to calculate cash flows, purchases, cost of goods sold, and operating expenses for specific months.

    Original Description:

    Strategic Costing

    Original Title

    Profit planning and budgeting

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    The document contains 4 sections that provide budgeting and financial planning details for various companies: 1. Provides inventory levels and expense estimates for Kings Company to calculate cost of goods sold, manufacturing costs, factory overhead, and materials purchases. 2. Gives monthly sales data for Chronicles, Inc. and asks to calculate account receivable collections and balances based on the company's collection patterns. 3. Outlines sales projections and cost assumptions for Ezra merchandising to determine projected merchandise purchases for October and November. 4. Presents Nehemiah Company's sales estimates and expense budgets to calculate cash flows, purchases, cost of goods sold, and operating expenses for specific months.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    396 views3 pages

    Profit Planning and Budgeting

    Uploaded by

    Royce Maenard Estanislao
    The document contains 4 sections that provide budgeting and financial planning details for various companies: 1. Provides inventory levels and expense estimates for Kings Company to calculate cost of goods sold, manufacturing costs, factory overhead, and materials purchases. 2. Gives monthly sales data for Chronicles, Inc. and asks to calculate account receivable collections and balances based on the company's collection patterns. 3. Outlines sales projections and cost assumptions for Ezra merchandising to determine projected merchandise purchases for October and November. 4. Presents Nehemiah Company's sales estimates and expense budgets to calculate cash flows, purchases, cost of goods sold, and operating expenses for specific months.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    PROFIT PLANNING AND BUDGETING

    1. Kings Company has budgeted sales at P100,000 and expect a profit of 10% of the sales. Expenses are
    estimated as follows: selling = 15% of sales; administrative = 10% of sales. Labor is expected to be
    40% of the total manufacturing costs. Factory overhead is to be applied at 75% of direct labor costs.
    Inventories are to be as follows:

    January 1 December 31

    Materials P10,000 P5,000


    Work-in-process 3,000 8,000
    Finished goods 7,000 12,000

    Required: Determine the following:

    a. Cost of goods sold


    b. Total manufacturing costs
    c. Factory overhead
    d. Materials purchases

    2. Past collections experienced by Chronicles, Inc. Indicate 60% of the net sales billed in the month are
    collected during the month of sales, 30% are collected in the following month, and 10% are
    collected in the second following month. A record of monthly net sales of previous months is as
    follows:

    November 2018 P450,000


    December 2018 460,000
    January 2019 480,000
    February 2019 420,000
    March 2019 500,000
    April 2019 550,000
    May 2019 600,000
    June 2019 700,000

    On January 1, 2019, the accounts receivable balance showed P229,000.

    Required:

    Determine collections on accounts receivable during:


    a. January 2019
    b. March 2019
    c. May 2019

    Determine accounts receivable balance at the end of:


    a. February 2019
    b. April 2019
    c. June 2019
    3. The sales manager of Ezra merchandising has budgeted the following sales for the 4 th quarter of
    2019:

    October P123,500
    November 156,000
    December 208,000

    Other budget estimates are:


    - All merchandises are to sell at its invoice cost plus 30% mark-up.
    - Beginning of inventories of each month are budgeted at 40% of that particular month’s projected cost
    of goods sold.

    Required:

    a. Determine the projected merchandise purchases for the month of October.


    b. Determine the projected merchandise purchases for the month of November.

    4. Nehemiah Company has been accumulating operating data in order to prepare an annual profit
    plan. Details regarding sales for the first 6 months of the coming year are as follows:

    Estimated monthly sales Type of monthly sales Collection pattern for credit sales
    January P 600,000 Cash sales 20% Month of sale 30%
    February 650,000 Credit sales 80% One month following sale 40%
    March 700,000 Second month following sale 25%
    April 625,000
    May 720,000
    June 800,000

    Nehemiah’s cost of goods sold averages 40% of the sales value. Company’s objective is to maintain a
    target inventory equal to 30% of the next month’s sales in units. Purchases of merchandise for resale are
    paid for in the month following sale. The variable operating expenses (other than cost of goods sold) for
    Nehemiah are 10% of sales and are paid for in the month following the sale. The annual fixed operating
    expenses are presented below. All of these are incurred uniformly throughout the year and paid
    monthly except for insurance and property taxes. Insurance is paid quarterly in January, April, July and
    October. Property taxes are paid twice a year in April and October.

    Advertising P720,000
    Depreciation 420,000
    Insurance 180,000
    Property taxes 240,000
    Salaries 1,080,000
    Required:

    a. How much is the amount of cash collected in March from the sales made during March?
    b. How much is the total cash receipts for the month of April?
    c. How much is the purchase of merchandise the company will need to make during February?
    d. How much is the cost of goods sold projected for the month of February?
    e. How much is the total cash disbursement for operating expenses (excluding cost of goods sold)
    during April?

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