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Chapter 22: Q23E (page 1233)

Preparing an operating budget鈥攕ales and production budgets

Lugo Company manufactures drinking glasses. One unit is a package of eight glasses, which sells for $30. Lugo projects sales for April will be 2,000 packages, with sales increasing by 250 packages per month for May, June, and July. On April 1, Lugo has 325 packages on hand but desires to maintain an ending inventory of 20% of the next month鈥檚 sales. Prepare a sales budget and a production budget for Lugo for April, May, and June.

Short Answer

Expert verified

Answer

Budgeted tablets to be produced

2,125

2,300

2,550

2,800

Budgeted sales revenue

$60,000

$67,500

$75,000

$82,500

Step by step solution

01

Preparation of sales budget


April

May

June

July

No. of units to be sold

2,000

2,250

2,500

2,750

Selling price per unit

X $30

X $30

X $30

X $30

Budgeted sales revenue

$60,000

$67,500

$75,000

$82,500

02

Preparation of production budget


April

May

June

July

No. of units to be sold

2,000

2,250

2,500

2,750

Plus: Desired tablets in ending inventory

450

500

550

600

Total units needed

2,450

2,750

3,050

3,350

Less: Tablets in beginning inventory

325

450

500

550

Budgeted tablets to be produced

2,125

2,300

2,550

2,800

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Most popular questions from this chapter

What is budgetary slack? Why might managers try to build slack into their budgets?

Preparing an operating budget鈥攕ales budget

Yarbrough Company manufactures T-shirts printed with tourist destination logos. The following table shows sales prices and projected sales volume for the summer months:

Projected Sales in Units T-Shirt Sizes Sales Price June July August Youth $ 7 575 500 525 Adult鈥攔egular 17 625 900 825 Adult鈥攐versized 18 400 500 475 Prepare a sales budget for Yarbrough Company for the three months.

Preparing an operating budget鈥攕elling and administrative expense budget

Consider the sales budget presented in Exercise E22-31. Slate鈥檚 selling and administrative expenses include the following:

Rent, \(2,000 per month

Salaries, \)4,000 per month

Commissions, 5% of sales

Depreciation, $1,000 per month

Miscellaneous expenses, 2% of sales

Prepare a selling and administrative expense budget for each of the three quarters of 2018 and totals for the nine-month period.

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?

Explain the difference between static and flexible budgets.
See all solutions

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