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Chapter 22: 3SE (page 1229)

Preparing an operating budget鈥攕ales budget Brown Company manufactures luggage sets. Brown sells its luggage sets to department stores. Brown expects to sell 1,700 luggage sets for \(180 each in January and 2,050 luggage sets for \)180 each in February. All sales are cash only. Prepare the sales budget for January and February.

Short Answer

Expert verified

Budgeted sales for January and February is $306,000 and $369,000 respectively.

Step by step solution

01

Meaning of sales budget

A budget that is prepared for getting an estimation of sales in the future.

02

Preparation of sales budget for January and February

Particulars

January

February

Budgeted luggage bags to be sold

1,700

2,050

Sales price per unit

$180

$180

Total

$306,000

$369,000

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Most popular questions from this chapter

Preparing a financial budget鈥攃ash budget

You recently began a job as an accounting intern at Reilly Golf Park. Your first task was to help prepare the cash budget for April and May. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a paper copy. You ran a program to salvage bits of data from the budget file. After entering the following data in the budget, you may have just enough information to reconstruct the budget.

Reilly Golf Park eliminates any cash deficiency by borrowing the exact amount needed from First Street Bank, where the current interest rate is 6% per year. Reilly Golf Park first pays interest on its outstanding debt at the end of each month. The company then repays all borrowed amounts at the end of the month with any excess cash above the minimum required but after paying monthly interest expenses. Reilly does not have any outstanding debt on April 1.

Complete the cash budget. Round interest expense to the nearest whole dollar.

Explain the difference between strategic and operational budgets

Patrick works for McGill鈥檚 Computer Repair, owned and operated by Frank McGill. As a computer technician, Patrick has grown accustomed to friends and family members asking for assistance with their personal computers. In an effort to increase his income, Patrick started a personal computer repair business that he operates out of his home on a part-time basis, working evenings and weekends. Because Patrick is doing this 鈥渙n the side鈥� for friends and family, he does not want to charge as much as McGill鈥檚 charges its customers. When Frank McGill assigned Patrick the task of developing the budget for his department, Patrick increased the amount budgeted for computer parts. When the budget was approved, Patrick purchased as many parts as the budget allowed, even when they were not needed. He then took the extra parts home to use in his personal business in an effort to keep his costs down and profits up. So far, no one at McGill鈥檚 has asked about the parts expense because Patrick has not allowed the actual amount spent to exceed the budgeted amount.

Requirements

1. Why would Patrick鈥檚 actions be considered fraudulent?

2. What can a company do to protect against this kind of business risk?

How is the predetermined overhead allocation rate determined?

How does the master budget for a merchandising company differ from a manufacturing company?
See all solutions

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