1. Budgeted monthly absorption costing income statements for April-July are: Sales Cost of goods sold Gross margin Selling and administrative expenses: Selling expense April $710,000 $ 880,000 497,000 616,000 213,000 May 89,000 49,500 264,000 108,000 67,200 138,500 175,200 June $ 74,500 $ 88,800 $ 590,000 Administrative expense Total selling and administrative expenses Net operating income "Includes $31,000 of depreciation each month. 1. Sales are 20% for cash and 80% on account. 2. Sales on account are collected over a three-month period with 10% collected in the month of sale; 70% collected in the first month following the month of sale, and the remaining 20% collected in the second month following the month of sale. February's sales totaled $275,000, and March's sales totaled $290,000. 3. Inventory purchases are paid for within 15 days. Therefore, 50% of a month's inventory purchases are paid for in the month of purchase. The remaining 50% is paid in the following month. Accounts payable at March 31 for inventory purchases during March total $130,900. 4. Each month's ending inventory must equal 20% of the cost of the merchandise to be sold in the following month. The merchandise inventory at March 31 is $99,400. 5. Dividends of $38,000 will be declared and paid in April. 6. Land costing $46,000 will be purchased for cash in May. 7. The cash balance at March 31 is $60,000; the company must maintain a cash balance of at least $40,000 at the end of each month 413,000 177,000 70,000 43.400 113,400 $ 63,600
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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