MPQ Corporation is in the process of assembling its budget for the quarter ending March 31. Please see the following sales data: Sales Price = $28 per unit January Sales In Units = 1,650 February Sales In Units = 1,400 March Sales In Units = 1,550 Budgeted sales are 30% cash and 70% credit Accounts Receivable, December 31 is $14,000. The $14,000 represents the uncollected portion of December sales. The company prefers inventory equal to 27% of the net month’s sales in units. The December 31 balance of inventory is 480 units. The cost of inventory is $12 per unit. 35% of the purchases are paid in the month of purchase and 57% are paid in the subsequent month. At December 31, the Accounts Payable balance is $6,800. The $6,800 represents the purchases unpaid in December. Miscellaneous Expenses are paid within the month incurred. These expenses consist of the following: Freight - 3% of Sales Sales Commissions - 8% of Sales Lease on Factory - $3,750 Salaries (Office) - $2,200 per month Please review the additional data below: Depreciation Expense = $3,850 per month Income Tax Rate = 38% (Income Taxes are paid on 4/1/2019 and 12/31/2019) The company desires to keep a minimal $10,000 cash balance Cash Balance, December 31 is $9,800 If there is a cash shortage, a loan is taken out to compensate at the end of the month. The interest on the loan is .8% per month, calculated from the beginning of the month balance on the loan. The interest must be paid each month. Please round to the nearest whole dollar. There is more cash than the minimum required, the additional amount is applied to paying down the debt. At December 31 there is not a balance on the loan. Instructions Prepare a master budget for each of the first three months during the calendar fiscal year. The master budget will include the following: Schedule of Cash Disbursements for Merchandise Purchases Schedule of Cash Disbursements for Selling and Administrative Expenses Cash Budget, including information on the loan balance
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.
MPQ Corporation is in the process of assembling its budget for the quarter ending March 31. Please see the following sales data:
- Sales Price = $28 per unit
- January Sales In Units = 1,650
- February Sales In Units = 1,400
- March Sales In Units = 1,550
- Budgeted sales are 30% cash and 70% credit
Accounts Receivable, December 31 is $14,000. The $14,000 represents the uncollected portion of December sales.
The company prefers inventory equal to 27% of the net month’s sales in units. The December 31 balance of inventory is 480 units. The cost of inventory is $12 per unit. 35% of the purchases are paid in the month of purchase and 57% are paid in the subsequent month. At December 31, the Accounts Payable balance is $6,800. The $6,800 represents the purchases unpaid in December.
Miscellaneous Expenses are paid within the month incurred. These expenses consist of the following:
- Freight - 3% of Sales
- Sales Commissions - 8% of Sales
- Lease on Factory - $3,750
- Salaries (Office) - $2,200 per month
Please review the additional data below:
Depreciation Expense = $3,850 per month- Income Tax Rate = 38% (Income Taxes are paid on 4/1/2019 and 12/31/2019)
- The company desires to keep a minimal $10,000 cash balance
- Cash Balance, December 31 is $9,800
- If there is a cash shortage, a loan is taken out to compensate at the end of the month. The interest on the loan is .8% per month, calculated from the beginning of the month balance on the loan. The interest must be paid each month. Please round to the nearest whole dollar.
- There is more cash than the minimum required, the additional amount is applied to paying down the debt.
- At December 31 there is not a balance on the loan.
Instructions
Prepare a
- Schedule of Cash Disbursements for Merchandise Purchases
- Schedule of Cash Disbursements for Selling and Administrative Expenses
Cash Budget , including information on the loan balanceBudgeted income statement for the quarter
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