In August, the budget committee of Donwoo Co. assembles the following data in preparation of budgeted merchandise purchases for the month of August. 1. Expected sales: August $750,000, September $900,000. 2. Cost of goods sold is expected to be 80% of sales. 3. Desired ending merchandise inventory is 40% of the following (next) month's cost of goods sold. 4. The beginning inventory at August 1 will be the desired amount. Instructions (A) Compute the budgeted merchandise purchases for August. (B) Prepare the budgeted income statement for August through gross profit. (C) Prepare the budgeted income statement for August through gross profit with the new assumption: the COGS is expected to be 75% sales and desired ending merchandise inventory is 45% of the following (next) month's COGS.
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.
In August, the budget committee of Donwoo Co. assembles the following data in preparation of budgeted
merchandise purchases for the month of August.
1. Expected sales: August $750,000, September $900,000.
2. Cost of goods sold is expected to be 80% of sales.
3. Desired ending merchandise inventory is 40% of the following (next) month's cost of goods sold.
4. The beginning inventory at August 1 will be the desired amount.
Instructions
(A) Compute the budgeted merchandise purchases for August.
(B) Prepare the
(C) Prepare the budgeted income statement for August through gross profit with the new assumption: the
COGS is expected to be 75% sales and desired ending merchandise inventory is 45% of the following
(next) month's COGS.
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