Required
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.
ZoLee Food Company is preparing budgets for the quarter ending Mar 31, 2020.
Jan 10,000 units
Feb 50,000 units
Mar 30,000 units
Apr 60,000 units
May 40,000 units
The management of this company assumes the following:
1) Selling price is $5.
2) On Dec 31, 2019, the finished goods totaled 3,000 units. Finished goods at the end of each month must be 20% of the following month’s budgeted sales.
3) All sales are on account. 70% of the credit sales are collected in the month of sale, 25% in the month following sale, and the remainders are uncollectible.
4) On Dec 31, 2019, the cash balance is $10,000.
Required:
a. Prepare the cash collection for each month for January, February, and March.
b. Prepare a budget showing the required production (in units) each month for January, February, and March.
c. Due to the COVID-19 outbreak, the company predicts only 50% of the budgeted sales in units can be achieved. Moreover, the company decides to cut the selling price to $3, and the company expects 50% of credit sales can be collected in the month of sale, 20% in the month following sale, the reminders are not collectible. The other things being the same. Please prepare the cash collection and required production (in units) for January, February, and March.
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