X Company needs a cash budget for the month of May. The following is available: a. Cash balance on May 1 is $3,500 b. Sales for April and May are $90,000 and $70,000 respectively. Cash collections on sales are 30% in the month of sale and 65 % in the month after the sale; 5% of sales are uncollectible. c. General expenses budgeted for May are $20,000 (depreciation represents $2,000 of this amount). d. Inventory purchases will total $26,000 in April and $32,000 in May. The company pays for half of its inventory purchases in the month of purchase and the other half the month after purchase. e. The company will pay $2,000 in cash for office furniture in May. Sales commissions for May are budgeted at $31,000. f. The company maintains a minimum ending cash balance of $3,500 and can borrow from the bank in multiples of $100. All loans are repaid after 60 days. Prepare a cash budget for the month of May.
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.
X Company needs a
a. Cash balance on May 1 is $3,500
b. Sales for April and May are $90,000 and $70,000 respectively. Cash collections on sales are 30% in the month of sale and 65 % in the month after the sale; 5% of sales are uncollectible.
c. General expenses budgeted for May are $20,000 (depreciation represents $2,000 of this amount).
d. Inventory purchases will total $26,000 in April and $32,000 in May. The company pays for half of its inventory purchases in the month of purchase and the other half the month after purchase.
e. The company will pay $2,000 in cash for office furniture in May. Sales commissions for May are budgeted at $31,000.
f. The company maintains a minimum ending cash balance of $3,500 and can borrow from the bank in multiples of $100. All loans are repaid after 60 days.
Prepare a cash budget for the month of May.
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