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Chapter 22: 4SE (page 1229)

Preparing an operating budget鈥攑roduction budget Bailey Company expects to sell 1,500 units of finished product in January and 1,750 units in February. The company has 180 units on hand on January 1 and desires to have an ending inventory equal to 80% of the next month鈥檚 sales. March sales are expected to be 1,820 units. Prepare Bailey鈥檚 production budget for January and February.

Short Answer

Expert verified

The budgeted units to be produced for January and February is 2,720 and 1,806 respectively.

Step by step solution

01

Meaning of sales budget

A budget that is prepared to estimate the sales revenue figure is known as a sales budget.

02

Preparation of sales budget for January and February

Particulars

January

February

Budgeted units to be sold

1,500

1,750

Plus: Desired tablets in ending inventory

1,400

1,456

Total units needed

2,900

3,206

Less: Units in beginning inventory

(180)

(1,400)

Total units to be produced

2,720

1,806

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Most popular questions from this chapter

Preparing a financial budget鈥攕chedule of cash receipts

Victors expects total sales of \(702,000 for January and \)349,000 for February. Assume that Victor'ssales are collected as follows:

50% in the month of the sale

30% in the month after the sale

16% two months after the sale

4% never collected

November sales totaled \(388,000, and December sales were \)407,000. Prepare a schedule of cash receipts from customers for January and February. Round answers to the nearest dollar.

Describing master budget components

Sarah Edwards, division manager for Pillows Plus, is speaking to the controller, Diana Rothman, about the budgeting process. Sarah states, 鈥淚鈥檓 not an accountant, so can you explain the three main parts of the master budget to me and tell me their purpose?鈥� Answer Sarah鈥檚 question.

Using sensitivity analysis in budgeting

Refer to the Berry鈥檚 schedule of cash receipts from customers that you prepared in Short Exercise S22-9. Now assume that Berry鈥檚 sales are collected as follows:

60% in the month of the sale

20% in the month after the sale

18% two months after the sale

2% never collected

Prepare a revised schedule of cash receipts for January and February.

Budgeting types Consider the following budgets and budget types.

Cash Cost of Goods Sold

Flexible Master

Operational Sales

Static Strategic

Which budget or budget type should be used to meet the following needs?

a. Upper management is planning for the next five years.

b. A store manager wants to plan for different levels of sales.

c. The accountant wants to determine if the company will have sufficient funds to pay expenses.

d. The CEO wants to make companywide plans for the next year.

Preparing a financial budget鈥攕chedule of cash receipts, sensitivity analysis

Marcel Company projects the following sales for the first three months of the year: \(11,200 in January; \)12,300 in February; and $11,100 in March. The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar.

Requirements

1. Prepare a schedule of cash receipts for Marcel for January, February, and March. What is the balance in Accounts Receivable on March 31?

2. Prepare a revised schedule of cash receipts if receipts from sales on account are 60% in the month of the sale, 30% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31?
See all solutions

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