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Chapter 22: 14SE (page 1231)

Question:Brooks Company expects to sell 8,500 units for \(175 each for a total of \)1,487,500 in January and 2,500 units for \(200 each for a total of \)500,000 in February. The company expects cost of goods sold to average 70% of sales revenue, and the company expects to sell 4,700 units in March for \(280 each. Brooks鈥檚 target ending inventory is \)20,000 plus 50% of the next month鈥檚 cost of goods sold. Prepare Brooks鈥檚 inventory, purchases, and cost of goods sold budget for January and February

Short Answer

Expert verified

Answer

Particular

January

February

Purchase

695,625

635,600

Cost of goods sold

1,041,250

350,000

Step by step solution

01

Preparation of operating budget

Brooks Company
Operating Budget

Particulars

January ($)

February ($)

Total ($)

Sale

$1,487,500

$500,000

$1,987,500

Cost of goods sold (70% of sales)

1,041,250

350,000

1,391,250

Add: Desired ending Inventory

195,000

480,600

675,600

Total Inventory

1,236,250

830,600

2,066,850

Less: Beginning Inventory

540,625

195,000

735,625

Budgeted Purchases

695,625

635,600

1,331,225

02

Computation of desired ending inventory and beginning inventory for January

DesiredendingInventoryforJanuary=Targetedending+50%ofFebruaryCOGS=20,000+350,000脳50%=$195,000COGSofMarch=(UnitSold脳SellingPricePerUnits)脳70%=(4,700脳$280)脳70%=$921,200DesiredendingInventoryforFebruary=Targetedending+50%ofMarchCOGS=20,000+921,20BeginningInventory=TargetedendingInventory+50%ofJanuaryCOGS=20,000+1,041,250脳50%=$540,625

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Most popular questions from this chapter

Preparing a financial budget鈥攕chedule of cash receipts

Berry expects total sales of \(359,000 in January and \)405,000 in February. Assume that Berry鈥檚 sales are collected as follows:

80% in the month of the sale

10% in the month after the sale

6% two months after the sales

4% never collected

November sales totaled \(350,000, and December sales were \)325,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

What are the three sections of the cash budget?

Preparing an operating budget鈥攃ost of goods sold budget Butler Company expects to sell 1,650 units in January and 1,550 units in February. The company expects to incur the following product costs:

Direct materials cost per unit \( 85

Direct labor cost per unit 60

Manufacturing overhead cost per unit 55

The beginning balance in Finished Goods Inventory is 250 units at \)200 each for a total of $50,000. Butler uses FIFO inventory costing method. Prepare the cost of goods sold budget for Butler for January and February.

: Completing a comprehensive budgeting problem鈥攎erchandising company

Belton Printing Company of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for the month of April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:

As Belton Printing鈥檚 controller, you have assembled the following additional information:

a. April dividends of \(7,000 were declared and paid.

b. April capital expenditures of \)17,000 budgeted for cash purchase of equipment.

c. April depreciation expense, \(800.

d. Cost of goods sold, 55% of sales.

e. Desired ending inventory for April is \)24,800.

f. April selling and administrative expenses includes salaries of \(29,000, 20% 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, \)86,000, 80% collected in April and 20% in May.

i. April cash payments of March 31 liabilities incurred for March purchases of inventory, \(8,300.

j. April purchases of inventory, \)22,900 for cash and $37,200 on account. Half the credit purchases will be paid in April and half in May

Requirements

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.

Match the following statements to the appropriate budgeting objective or benefit: developing strategies, planning, directing, controlling, coordinating and communicating, and benchmarking.

1. Managers are required to think about future business activities.

2. Managers use feedback to identify corrective action.

3. Managers use results to evaluate employees鈥� performance.

4. Managers work with managers in other divisions.
See all solutions

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