Calculate: Cost of sales Selling and Administrative Expense budget (Rough table attached below)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
CBH Company sells bicycles that they buy from various manufacturers. They are in the process of preparing a
Additional Details:
- The average estimated selling price per electric bike is $450.
- There are $2040 bicycles in Bike Inventory at the end of 2020 with a value of $380,000.
- At the end of each quarter, CBH Company wishes to have 85% of next quarters estimated sales units in Bike Inventory. At the end of 2021 assume 2000 bikes are required in the ending inventory.
- For each quarter, it is estimated that 75% of sales will be cash and 25% will be credit sales. Of the credit sales, 80% pay in a quarter of the sale and 20% pay in the following quarter.
- Credit sales from part4 were $430000
- Assume operating expenses occur evenly throughout the year and are all paid in cash
- For each quarter, 70% of Bike purchases are paid for in cash in the quarter of the purchase and 30% are paid in the following quarter. Total bike purchase in Q4 2020 was $510,000. The expected average purchase price of a bike in 2021 is $300.
- CBH company will pay $60,000 in dividends in Q4 2021
- The case balance in the bank at the end of 2020 is $10,000. CBH company wishes to maintain a minimum cash balance of $10,000 in the bank for each quarter.
- The budgeted 2021 sales volume for each quarter are: Q1 2400, Q2 2500, Q3 2600, Q4 2900.
Sales Wages:
Sales wages are a mixed cost (salary and commissions). CBH Company plans on estimating these costs for 2021
based on actual historical data using the high-low method.
Here are the total sales in units and the total sales wages expense for the last 4 years.
Units sold $
2020 12585 175130
2019 12905 179975
2018 11385 177225
2017 8175 137145
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Fixed Costs: |
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$ |
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Accounting & professional services |
1800 |
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Administrative Salaries |
77000 |
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Advertising |
9000 |
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Computer costs |
4200 |
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35000 |
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Office Supplies |
2300 |
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Printing |
1400 |
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Insurance |
1200 |
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Property taxes |
500 |
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Rent |
20000 |
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Utilities |
3000 |
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Total Fixed Costs |
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155400 |
CBH Company will purchase a new store on 1/1/2021 worth $500,000 to be be paid for in 2 equal payments. The first payment will be in Q1 and the second in Q3.
For Cost of Sales (COS);
Add total purchases + Beginning Bike Inventory - Ending Bike Inventory.
Interest expense for a quarter is calculated based on the loan balance at the end of the previous quarter
and is calculated based on an annual rate of 5.00%
The loan balance at the end of 2020 was $78,000
Calculate:
- Cost of sales
- Selling and Administrative Expense budget (Rough table attached below)
| Selling and Administrative Expense Budget | |||||||||
| Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 | Year | |||||
| Budgeted Sales in units: | |||||||||
| Variable Cost: | |||||||||
| Sales Wages | |||||||||
| Total Variable Costs: | |||||||||
| Fixed Costs: | |||||||||
| Accounting & professional services | |||||||||
| Administrative salaries | |||||||||
| Sales Wages - fixed portion | |||||||||
| Advertising | |||||||||
| Computer costs | |||||||||
| Depreciation | |||||||||
| Office Supplies | |||||||||
| Printing | |||||||||
| Insurance | |||||||||
| Property taxes | |||||||||
| Rent | |||||||||
| Utilities | |||||||||
| Total Fixed Costs: | |||||||||
| Total costs: |
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