BUDGETING

1. Ballan Inc. estimates its units sales for the coming months to be as follows:

March 280,000
April 260,000
May 250,000
June 230,000
July 240,000
August 225,000

Ballan maintains inventory at budgeted sales needs for the next month. March 1 inventory will be
248,000 units.
Prepare a monthly purchasing schedule for March through July.

2. Superior Company manufactures a single product. It keeps its inventory of finished goods at
twice the coming month's budgeted sales and inventory of raw materials at 150% of the coming
month's budgeted production. Each unit of product requires five pounds of materials, which cost
P3 per pound. The sales budget is, in units: May, 10,000; June, 12,400; July, 12,600; August,
13,200.
Required:
a. Compute budgeted production for June.
b. Compute budgeted production for July.
c. Compute budgeted material purchases for June in pounds and pesos.

3. Ironwood sells a single product for P10. The purchase cost is P4 per unit and Ironwood pays a
20% sales commission. Fixed costs are P45,000 per month including P12,000 depreciation, and
the company maintains inventory equal to budgeted sales needs for the following month. The
following budgeted data are available.

Inventory on hand, February 1 28,000 units

Budgeted sales - February 24,000 units
- March 26,000 units
- April 25,000 units

Required:
a. Compute total budgeted income for February and March.
b. Find budgeted inventory at March 31 in units and pesos.
c. Find budgeted purchases for March in units and pesos.

4. Webster Company has the following sales budget.

January 200,000
February 240,000
March 300,000
April 360,000

Cost of sales is 70% of sales. Sales are collected 40% in the month of sale and 60% in the
following month. Webster keeps inventory equal to double the coming month's budgeted sales
requirements. It pays for purchases 80% in the month of purchase and 20% in the month after
purchase. Inventory at the beginning of January is P190,000. Webster has monthly fixed costs
of P30,000 including P6,000 depreciation. Fixed costs requiring cash are paid as incurred.
Required:
a. Compute budgeted cash receipts in March.
b. Compute budgeted accounts receivable at the end of March.
c. Compute budgeted inventory at the end of February.
d. Compute budgeted purchases in February.
e. March purchases are P290,000. Compute budgeted cash payments in March to suppliers of
goods.
f. Compute budgeted accounts payable for goods at the end of February.
g. Cash at the end of February is P45,000. Cash disbursements are not required for anything
other than payments to
suppliers and fixed costs. Compute the budgeted cash balance at the end of March.

5. Weasel Company has the following sales projections for 2014:

January 200,000
February 210,000
March 225,000
April 230,000
May 245,000
June 240,000

Weasel collects 40% of its sales in the month of sale, 45% in the month following the sale and
13% in the second month following the sale. Records show that sales were P225,000 in
November and P208,000 in December 2013.

Required:
a. Prepare a schedule of cash receipts for the first three months of 2014.
b. What would be the accounts receivable (net of bad debts) balance on March 31, 2014?

6. All sales at Meeks Company, a wholesaler, are made on credit. Experience has shown that
70% of the accounts receivable are collected in the month of the sale, 26% are collected in the
month following the sale, and the remaining 4% are uncollectible. Actual sales for March and
budgeted sales for the following four months are given
below:
March (actual sales) ........... 200,000
April ................................... 300,000
May .................................... 500,000
June .................................... 700,000
July .................................... 400,000

The company's cost of goods sold is equal to 60% of sales. All purchases of inventory are made
on credit. Meeks Company pays for one half of a month's purchases in the month of purchase,
and the other half in the month following purchase. The company requires that end-of-month
inventories be equal to 25% of the cost of goods sold for
the next month.

Required:
a. Compute the amount of cash, in total, which the company can expect to collect in May.
b. Compute the budgeted dollar amount of inventory which the company should have on
hand at the end of April.
c. Compute the amount of inventory that the company should purchase during the months
of May and June.
d. Compute the amount of cash payments that will be made to suppliers during June for
purchases of inventory.
1.
a.Marchpurchases: 292,000units[280,000+260,000248,000]

Aprilpurchases: 250,000units[260,000+250,000260,000]

Maypurchases: 230,000units[250,000+230,000250,000]

Junepurchases: 240,000units[230,000+240,000230,000]

Julypurchases: 225,000units[240,000+225,000240,000]

2.

a.Juneproduction:12,800units[12,400+(2x12,600)(2x12,400)]

b.Julyproduction:13,800units[12,600+(2x13,200)(2x12,600)]

c.Junematerialspurchases:71,500pounds;$214,500

Usedinproduction(5lbs.x12,800)64,000lbs.
Endinginventory(5lbs.x13,800x150%)103,500

Total167,500
Lessbeginninginventory(5lbs.x12,800x150%)96,000

Purchases71,500
Timescostperpound$3

Equalsdollarpurchases$214,500
========

3.
a.Budgetedincome:$110,000

Sales[(24,000+26,000)x$10]$500,000
Costofsales(50,000x$4)200,000

Grossprofit$300,000
Commissionsat20%100,000

Contributionmargin$200,000
Fixedcosts(2x45,000)90,000

Income$110,000
========

b.Budgetedinventory:25,000units;$100,000($4x25,000)

c.Budgetedpurchases:25,000units;$100,000

Costofsales26,000units$104,000
Endinginventory25,000100,000

Totalrequired51,000$204,000
Lessbeginninginventory26,000104,000

Purchases25,000unitsx$4$100,000
==============

4.
a.Marchreceipts:$264,000[($240,000x60%)+($300,000x40%)]

b.ReceivablesatendofMarch:$180,000[$300,000x(100%40%)]

c.InventoryatendofFebruary:$420,000($300,000x70%x2)

d.Februarypurchases:$252,000[($240,000x70%)+($300,000x2x70%)
($240,000x2x70%)]

e.Marchpayments:$282,400[(252,000x20%)+($290,000x80%)]

f.APatendofFebruary:$50,400($252,000x20%)

g.CashatendofMarch:$2,600($45,000+$264,000$282,400$24,000)

5.
a. Januarycollections: (13%x225,000)=$29,250
(45%x208,000)=93,600
(40%x200,000)=80,000

$202,850
========

Februarycollections:(13%x208,000)=$27,040
(45%x200,000)=90,000
(40%x210,000)=84,000

$201,040
========

Marchcollections:(13%x200,000)=$26,000
(45%x210,000)=94,500
(40%x225,000)=90,000

$210,500
========

b. $157,800 $27,300=Februarysales210,000x13%
$130,500=Marchsales225,000x(45%+13%)

$157,800
========

6.
a. Sales, April: $300,000 0.26 ........... $ 78,000
Sales, May: $500,000 0.70 ............ 350,000
Total Collections .............................. $428,000
b. Budgeted cost of goods sold for May:
$500,000 60% = $300,000
Required inventory level at the end of April:
$300,000 25% = $75,000

c. May June July

Budgeted sales ........................................ $ 500,000 $700,000 $400,000
Budgeted cost of goods sold (60%) ........ 300,000 420,000 240,000
Desired ending inventory, at cost* .......... 105,000 60,000
Total needs .............................................. 405,000 480,000
Less beginning inventory, at cost** ........ 75,000 105,000
Required purchases, at cost ..................... $330,000 $375,000

*Following months cost of goods sold 25%

**Current months cost of goods sold 25%

d. Payments for May purchases: $330,000 0.50 ........ $165,000

Payments for June purchases: $375,000 0.50 ........ 187,500
$352,500