Peters Products, a distributor of organic beverages, needs a cash budget for September. The following information is available: The cash balance at the beginning of August is 9,000€. Contribution margin is 50% (COGS are 50% of sales) Actual sales for July and expected sales for August, September and October are as shown below. Some customers pay in cash (Cash sales) and others in account as described in the figure below. Customers that pay in account, make the payment the month after. Purchases of inventory (company just resells what they buy) must be done so that the end of month inventory must cover 20% of next month sales. Initial inventory in July was 5.300€. 100% of a month’s inventory purchases are paid for during the month of purchase. Prepare a schedule of expected cash collections for August, September & October. Prepare a merchandise purchases budget for July, August, and September. Prepare a schedule of expected cash flow (cash in minus cash out) for August, and September.
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.
Peters Products, a distributor of organic beverages, needs a
- The cash balance at the beginning of August is 9,000€.
- Contribution margin is 50% (COGS are 50% of sales)
- Actual sales for July and expected sales for August, September and October are as shown below. Some customers pay in cash (Cash sales) and others in account as described in the figure below. Customers that pay in account, make the payment the month after.
- Purchases of inventory (company just resells what they buy) must be done so that the end of month inventory must cover 20% of next month sales. Initial inventory in July was 5.300€. 100% of a month’s inventory purchases are paid for during the month of purchase.
- Prepare a schedule of expected cash collections for August, September & October.
- Prepare a merchandise purchases budget for July, August, and September.
- Prepare a schedule of expected
cash flow (cash in minus cash out) for August, and September.
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