Prepare a cash budget for Atlas Products, Inc. for the first year of 20X2, based on the following information. The budgeting section of the corporate finance department of Atlas Products has received the following sales estimates from the marketing department: Total Sales Credit Sales December 20X1 $825,000 $770,000 January 20X2 730,000 690,000 February 20X2 840,000 780,000 March 20X2 920,000 855,000 The company has found that, on average, about 25 percent of its credit sales are collected during the month when the sale is made, and the remaining 75 percent of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting. The company estimates its purchases at 60 percent of next month's sales, and payment for those purchases are budgeted to lag the purchases by 1 month. Various disbursements have been estimated as follows: 139 January February March Wages and salaries $250,000 $290,000 $290,000 Rent 27,000 27,000 27,000 Other expenses 10,000 12,000 14,000 In addition, a tax payment of $105,000 is due on January 15, and $40,000 in dividends will be declared in January and paid in March. Also, the company has ordered a $75,000 piece of equipment. Delivery is scheduled for early January; and payment will be due in February. The company's projected cash balance at the beginning of January is $100,000, and the company desires to maintain a balance of $100,000 at the end of each month. 2.
Prepare a cash budget for Atlas Products, Inc. for the first year of 20X2, based on the following information. The budgeting section of the corporate finance department of Atlas Products has received the following sales estimates from the marketing department: Total Sales Credit Sales December 20X1 $825,000 $770,000 January 20X2 730,000 690,000 February 20X2 840,000 780,000 March 20X2 920,000 855,000 The company has found that, on average, about 25 percent of its credit sales are collected during the month when the sale is made, and the remaining 75 percent of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting. The company estimates its purchases at 60 percent of next month's sales, and payment for those purchases are budgeted to lag the purchases by 1 month. Various disbursements have been estimated as follows: 139 January February March Wages and salaries $250,000 $290,000 $290,000 Rent 27,000 27,000 27,000 Other expenses 10,000 12,000 14,000 In addition, a tax payment of $105,000 is due on January 15, and $40,000 in dividends will be declared in January and paid in March. Also, the company has ordered a $75,000 piece of equipment. Delivery is scheduled for early January; and payment will be due in February. The company's projected cash balance at the beginning of January is $100,000, and the company desires to maintain a balance of $100,000 at the end of each month. 2.
Chapter9: Projecting Financial Statements
Section: Chapter Questions
Problem 3EP
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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.
Question
Transcribed Image Text:2.
Prepare a cash budget for Atlas Products, Inc. for the first year of 20X2, based on
the following information.
The budgeting section of the corporate finance department of Atlas Products
has received the following sales estimates from the marketing department:
Total Sales
Credit Sales
December 20X1
$825,000
$770,000
January 20X2
730,000
690,000
February 20X2
840,000
780,000
March 20X2
920,000
855,000
The company has found that, on average, about 25 percent of its credit sales are
collected during the month when the sale is made, and the remaining 75 percent of credit
sales are collected during the month following the sale. As a result, the company uses these
figures for budgeting.
The company estimates its purchases at 60 percent of next month's sales, and payment
for those purchases are budgeted to lag the purchases by 1 month.
Various disbursements have been estimated as follows:
139
January
February
March
Wages and salaries
$250,000
$290,000
$290,000
Rent
27,000
27,000
27,000
Other expenses
10,000
12,000
14,000
In addition, a tax payment of $105,000 is due on January 15, and $40,000 in dividends will
be declared in January and paid in March. Also, the company has ordered a $75,000 piece
of equipment. Delivery is scheduled for early January; and payment will be due in February.
The company's projected cash balance at the beginning of January is $100,000, and the
company desires to maintain a balance of $100,000 at the end of each month.
Transcribed Image Text:Self-Test Problems:
1.
Use the percentage of sales forecasting method to compute the additional financing
needed by Lambrechts Specialty Shops, Inc. (LSS), if sales are expected to
increase from a current level of $20 million to a new level of $25 million over the
coming year. LSS expects earnings after taxes to equal $1 million over the next
year. LSS intends to pay a $300,000 dividend next year. The current year balance
sheet for LSS is as follows:
Lambrechts Specialty Shops, Inc.
138
Balance Sheet as of December 31, 20X3
cash
$1,000,000 Accounts payable
$3,000,000
Accounts receivable
1,500,000 Notes payable
3,000,000
inventories
6,000,000 Long-term debt
2,000,000
Net fixed assets
3,000,000 Stockholders' equity
3,500,00
Total Assets
$11,500,000 Total liabilities and equity
$11,500,000
All assets, except "cash", are expected to vary proportionately with sales. Of total liabilities
and equity, only “accounts payable" is expected to vary proportionately with sales.
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