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Chapter 22: Q6TI (page 1219)

Connor Company began operations on January 1 and has projected the following selling and administrative expenses:

Rent Expense $ 1,000 per month, paid as incurred

Utilities Expense 500 per month, paid in month after incurred

Depreciation Expense 300 per month

Insurance Expense 100 per month, 6 months prepaid on January 1

Determine the cash payments for selling and administrative expenses for the first three months of operations.

Short Answer

Expert verified

The total selling and administrative expenses for January, February, and Marchare$2,400, $1,800, and $1,800, respectively.

Step by step solution

01

Meaning of Selling and Administrative Expense Budget

The selling and administrative expense budget is prepared to estimate the company鈥檚 selling and administrative expenses needed for projected sales.

02

 Step 2: Preparation of selling and administrative expense budget

Particulars

January

February

March

Rent expense

$1,000

$1,000

$1,000

Utilities expense

$500

$500

$500

Depreciation expense

$300

$300

$300

Insurance expense ($100*6)

$600

-

-

Total selling and administration expenses

$2,400

$1,800

$1,800

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Most popular questions from this chapter

Preparing an operating budget鈥攊nventory, purchases, and cost of goods sold budget

Slate, Inc. sells tire rims. Its sales budget for the nine months ended September 30, 2018, follows:

Quarter Ended Nine-MonthTotal

March 31 June 30 September 30 Cash sales, 20% \( 28,000 \) 38,000 \( 33,000 \) 99,000

Credit sales, 80% 112,000 152,000 132,000 396,000 Total sales \( 140,000 \) 190,000 \( 165,000 \) 495,000

In the past, cost of goods sold has been 40% of total sales. The director of marketing and the financial vice president agree that each quarter鈥檚 ending inventory should not be below \(5,000 plus 10% of cost of goods sold for the following quarter. The marketing director expects sales of \)240,000 during the fourth quarter. The January 1 inventory was $38,000. Prepare an inventory, purchases, and cost of goods sold budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period.

Preparing an operating budget鈥攃ost of goods sold budget

Refer to the budgets prepared in Exercise E22-24. Determine the cost per kit to manufacture the model airplane kits. Grady projects sales of 100, 150, 100, and 200 kits for the next four quarters. Prepare a cost of goods sold budget for the year. Grady has no kits in beginning inventory. Round amounts to two decimal places.

Question: Preparing a financial budget鈥攕chedule of cash receipts, schedule cash payments, cash budget

Baxter Company鈥檚 budget committee provides the following information: December 31, 2017, account balances:

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February 2018. Assume no financing took place.

Preparing an operating budget鈥攄irect materials, direct labor, and manufacturing overhead budgets

Grady, Inc. manufactures model airplane kits and projects production at 650, 500, 450, and 600 kits for the next four quarters. Direct materials are 4 ounces of plastic per kit and the plastic costs \(1 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 850 ounces, and the company desires to end each quarter with 10% of the materials needed for the next quarter鈥檚 production. Grady desires a balance of 200 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.10 hours of direct labor at an average cost of \)10 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is \(0.20 per kit, and fixed overhead is \)165 per quarter. Prepare Grady鈥檚 direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.

Preparing the financial budget鈥攂udgeted balance sheet

Barker, Inc. has the following balance sheet at December 31, 2018:

Barker projects the following transactions for 2019:

Sales on account, \(20,000

Cash receipts from customers from sales on account, \)17,600

Purchase of raw materials on account, \(7,000

Payments on account, \)3,500

Total cost of completed products, \(16,600, which includes the following:

Raw materials used, \)7,100

Direct labor costs incurred and paid, \(3,900

Manufacturing overhead costs incurred and paid, \)4,800

Depreciation on manufacturing equipment, \(800

Cost of goods sold, \)14,800

Selling and administrative costs incurred and paid, \(500

Purchase of equipment, paid in 2019, \)2,000

Prepare a budgeted balance sheet for Barker, Inc. for December 31, 2019. (Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)
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