5th Edition

ISBN: 9780134128528

Author: Karen W. Braun, Wendy M. Tietz

Publisher: PEARSON

Concept explainers

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…

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…

Videos

Textbook Question

Chapter 9, Problem 9.72BP

Prepare comprehensive budgets for a retailer (Learning Objectives 2, 3, & 4)

Dollar Discount Store is a local discount store with the following information:

October sales are projected to be $300,000.
Sales are projected to increase by 10% in November and another 20% in December and then return to the October level in January.
25% of sales are made in cash, while the remaining 75% are paid by credit or debit cards. The credit card companies and banks (debit card issuers) charge a 2% transaction fee and deposit the net amount (sales price less the transaction fee) in the store’s bank account daily. The store does not accept checks. Because of the payment mechanisms, there is no risk of nonpayment or bad-debts.
The store’s gross profit is 25% of its sales revenue.
For the next several months, the store wants to maintain an ending merchandise inventory equal to $5,000 + 20% of the next month’s cost of good sold. All purchases for merchandise are made on account and paid in the month following the purchase. The September 30 inventory is expected to be $50,000.
Expected monthly operating expenses and details about payments include the following.
- Wages of store workers should be $9,000 per month and are paid on the last day of each month.
- Utilities expense is expected to be $1,200 per month in September, October, and November.
- Utilities expense is expected to be $2,000 per month during the colder months of December, January, and February.
- All utility bills are paid the month after incurred.
- Property tax is $24,000 per year and is paid semiannually each December and June.
- Property and liability insurance is $12,000 per year and is paid semiannually each January and July.
- Depreciation expense is $144,000 per year; the straight-line method is used.
- Transaction fees, as stated earlier, are 2% of credit and debit card sales.
Cash dividends of $225,000 are to be paid in December.
Assume the cash balance on October 31 is $10,000. The company wants to maintain a cash balance of at least $10,000 at the end of every month.
The company has arranged a line of credit with a local bank at a 5% interest rate. There is no outstanding debt as of October 31.

Requirements

Prepare the following budgets for November and December:

1. Sales budget
2. Cost of goods sold, inventory, and purchases budget
3. Operating expense budget
4. Budgeted income statement
5. Cash collections budget
6. Cash payments budget
7. Combined cash budget

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 9, Problem 9.71BP

Chapter 9, Problem 9.73SC

Students have asked these similar questions

(Learning Objective 5: Use the COGS model to make management decisions)Spicer Industries prepares budgets to help manage the company. Spicer is budgeting forthe fiscal year ended January 31, 2018. During the preceding year ended January 31, 2017,sales totaled $9,700 million and cost of goods sold was $6,400 million. At January 31, 2017,inventory was $1,500 million. During the upcoming 2018 year, suppose Spicer expects costof goods sold to increase by 12%. The company budgets next year’s ending inventory at$1,800 million.Requirement1. One of the most important decisions a manager makes is how much inventory to buy. Howmuch inventory should Spicer purchase during the upcoming year to reach its budget?

Prepare Hilton goods sold computations. 2. Prepare a combined cash budget similar to exhibits in the chapter. If no financing ac- P9-61A Cash budgets (Learning Objective 3) and cash disbursements: are as follows: Budgeted Sales Revenue $62,000 January $70,000 February. b. Actual purchases of direct materials in December were $24,500. The companye purchases of direct materials in January are budgeted to be $24,000 and $26.000 i February. All purchases are paid 40% in the month of purchase and 60% the follow month. c. Salaries and sales commissions are also paid half in the month earned and half the next month. Actual salaries were $8,000 in December. Budgeted salaries in Janu- ary are $9,000 and February budgeted salaries are $10,500. Sales commissions each month are 8% of that month's sales. d. Rent expense is $3,500 per month. e. Depreciation is $2,100 per month. f. Estimated income tax payments are made at the end of January. The estimated tax payment is projected to be $12,500. g.…

ing price of $26 per case. The following information relates to the budget for Main Street a flexible budget performance report (Learning Objective 5) Main Street Muffins sells its muffins to restaurants and coffee houses for an average sell- Muffins for this year (all figures are annual totals unless otherwise noted): Performance Evaluation 629 E10-26A Prepare Budgeted sales in cases 9,100 cases Packaging cost per case. %24 Shipping expense per case Sales commission expense. 2 5% of sales price Salaries expense.. $6,500 Office rent $3,900 Depreciation. $2,500 Insurance expense... $1,800 $ 900 Office supplies expense. During the year, Main Street Muffins actually sold 9,500 cases, resulting in total sales rev- enue of $255,200. Actual expenses (in total) from this year are as follows: Packaging cost. $ 10,600 $ 19,500 $ 12,760 $ 7,300 Shipping expense.. Sales commission expense. Salaries expense... $ 3,900 $ 2,500 $ 1,600 Office rent Depreciation. Insurance expense.. $ 1,600 Office…

Chapter 9 Solutions

Managerial Accounting (5th Edition)

Ch. 9 - (Learning Objective 1) Which term describes the...Ch. 9 - (Learning Objective 1) Benefits of budgeting...Ch. 9 - Prob. 3QC Ch. 9 - Prob. 4QC Ch. 9 - Prob. 5QC Ch. 9 - Prob. 6QC Ch. 9 - Prob. 7QC Ch. 9 - Prob. 8QC Ch. 9 - Prob. 9QC Ch. 9 - Prob. 10QC

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Solution Summary: The author explains the sales budget for the month of November and December. It includes all the estimated sales from the entire operating source.

Concept explainers

Videos

Want to see the full answer?

Chapter 9 Solutions