Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of goods sold to equal 70% of sales. Its inventory policy calls for ending inventory at the end of each month to equal 20% of the next month’s budgeted cost of goods sold. All purchases are on credit, and 25% of the purchases in a month is paid for in the same month. Another 60% is paid for during the first month after purchase, and the remaining 15% is paid for in the second month after purchase. The following sales budgets are set: July, $350,000; August, $290,000; September, $320,000; October, $275,000; and November, $265,000. Compute the following: (1) budgeted merchandise purchases for July, August, September, and October; (2) budgeted payments on accounts payable for September and October; and (3) budgeted ending balances of accounts payable for September and October. Hint: For part 1, refer to Exhibits 22A.2 and 22A.3 for guidance, but note that budgeted sales are in dollars for this assignment.
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.
Big Sound, a merchandising company specializing in home computer speakers, budgets its monthly cost of
goods sold to equal 70% of sales. Its inventory policy calls for ending inventory at the end of each month to
equal 20% of the next month’s budgeted cost of goods sold. All purchases are on credit, and 25% of the purchases
in a month is paid for in the same month. Another 60% is paid for during the first month after purchase,
and the remaining 15% is paid for in the second month after purchase. The following sales budgets are
set: July, $350,000; August, $290,000; September, $320,000; October, $275,000; and November, $265,000.
Compute the following: (1) budgeted merchandise purchases for July, August, September, and October;
(2) budgeted payments on accounts payable for September and October; and (3) budgeted ending balances
of accounts payable for September and October. Hint: For part 1, refer to Exhibits 22A.2 and 22A.3 for
guidance, but note that budgeted sales are in dollars for this assignment.
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