ACC 100 Lecture Notes - Lecture 4: Accounts Receivable, Cash Flow, Accounts Payable
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Flexible Budget for Selling and Administrative Expenses for aService Company
Morningside Technologies Inc. uses flexible budgets that arebased on the following data:
Sales commissions | 7% of sales |
Advertising expense | 25% of sales |
Miscellaneous administrative expense | $1,850 per month plus 3% of sales |
Office salaries expense | $17,000 per month |
Customer support expenses | $2,600 plus 4% of sales |
Research and development expense | 5,750 per month |
Prepare a flexible selling and administrative expenses budgetfor April for sales volumes of $115,000, $145,000, and $175,000.Enter all amounts as positive numbers.
Morningside Technologies Inc. | |||
Flexible Selling and Administrative ExpensesBudget | |||
Forthe Month Ending April 30 | |||
Total sales | $115,000 | $145,000 | $175,000 |
Variable cost: | |||
Sales commissions | $ | $ | $ |
Advertising expense | |||
Miscellaneousadministrative expense | |||
Customer support expense | |||
Total variable cost | $ | $ | $ |
Fixed cost: | |||
Miscellaneous administrative expense | $ | $ | $ |
Office salaries expense | |||
Customer support expense | |||
Research and development expense | |||
Total fixed cost | $ | $ | $ |
Total selling and administrativeexpenses | $ | $ | $ |
2.
Sales and Production Budgets
Sonic Inc. manufactures two models of speakers, Rumble andThunder. Based on the following production and sales data for June,prepare (a) a sales budget and (b) a production budget.
Rumble | Thunder | ||
Estimated inventory (units), June 1 | 278 | 77 | |
Desired inventory (units), June 30 | 319 | 67 | |
Expected sales volume (units): | |||
East Region | 4,100 | 4,600 | |
West Region | 5,000 | 4,350 | |
Unit sales price | $115 | $185 |
a. Prepare a sales budget.
SonicInc. | |||
SalesBudget | |||
Forthe Month Ending June 30 | |||
Product and Area | Unit Sales Volume | Unit Selling Price | Total Sales |
Model Rumble: | |||
East Region | $ | $ | |
West Region | |||
Total | $ | ||
Model Thunder: | |||
East Region | $ | $ | |
West Region | |||
Total | $ | ||
Total revenue from sales | $ |
3.
Cash Budget
The controller of Sonoma Housewares Inc. instructs you toprepare a monthly cash budget for the next three months. You arepresented with the following budget information:
May | June | July | ||||
Sales | $90,000 | $111,000 | $142,000 | |||
Manufacturing costs | 38,000 | 48,000 | 51,000 | |||
Selling and administrative expenses | 26,000 | 30,000 | 31,000 | |||
Capital expenditures | _ | _ | 34,000 |
The company expects to sell about 10% of its merchandise forcash. Of sales on account, 60% are expected to be collected in themonth following the sale and the remainder the following month(second month following sale). Depreciation, insurance, andproperty tax expense represent $9,000 of the estimated monthlymanufacturing costs. The annual insurance premium is paid inSeptember, and the annual property taxes are paid in November. Ofthe remainder of the manufacturing costs, 75% are expected to bepaid in the month in which they are incurred and the balance in thefollowing month.
Current assets as of May 1 include cash of $34,000, marketablesecurities of $49,000, and accounts receivable of $107,800 ($79,000from April sales and $28,800 from March sales). Sales on accountfor March and April were $72,000 and $79,000, respectively. Currentliabilities as of May 1 include $10,000 of accounts payableincurred in April for manufacturing costs. All selling andadministrative expenses are paid in cash in the period they areincurred. An estimated income tax payment of $13,000 will be madein June. Sonomaâs regular quarterly dividend of $9,000 is expectedto be declared in June and paid in July. Management wants tomaintain a minimum cash balance of $27,000.
Required:
1. Prepare a monthly cash budget and supportingschedules for May, June, and July. Input all amounts as positivevalues except overall cash decrease and deficiency which should beindicated with a minus sign.
Sonoma Housewares Inc. | |||
CashBudget | |||
Forthe Three Months Ending July 31 | |||
May | June | July | |
Estimated cash receipts from: | |||
Cash sales | $ | $ | $ |
Collection of accounts receivable | |||
Total cash receipts | $ | $ | $ |
Estimated cash payments for: | |||
Manufacturing costs | $ | $ | $ |
Selling and administrative expenses | |||
Capital expenditures | |||
Other purposes: | |||
Income tax | |||
Dividends | |||
Total cash payments | $ | $ | $ |
Cash increase or (decrease) | $ | $ | $ |
Cash balance at beginning of month | |||
Cash balance at end of month | $ | $ | $ |
Minimum cash balance | |||
Excess or (deficiency) | $ | $ | $ |
4.
Factory Overhead Cost Budget
Sweet Tooth Company budgeted the following costs for anticipatedproduction for August:
Advertising expenses | $259,400 |
Manufacturing supplies | 14,220 |
Power and light | 42,400 |
Sales commissions | 290,020 |
Factory insurance | 24,690 |
Production supervisor wages | 124,710 |
Production control wages | 32,420 |
Executive officer salaries | 264,390 |
Materials management wages | 35,670 |
Factory depreciation | 20,210 |
Prepare a factory overhead cost budget, separating variable andfixed costs. Assume that factory insurance and depreciation are theonly fixed factory costs.
SweetTooth Company | ||
Factory Overhead Cost Budget | ||
Forthe Month Ending August 31 | ||
Variable factory overhead costs: | ||
Manufacturingsupplies | $ | |
Power and light | ||
Production supervisorwages | ||
Production controlwages | ||
Materials managementwages | ||
Total variable factory overhead costs | $ | |
Fixed factory overhead costs: | ||
Factory insurance | $ | |
Factory depreciation | ||
Total fixed factory overhead costs | ||
Total factory overhead costs | $ |