Soprano Co. is in the process of preparing the second quarter budget for 2019, and the following data have been assembled: • The company sells a single product at a selling price of $45 per unit. The estimated sales volume for the next six months is as follows: March April May 6,400 units 7,000 units 10,000 units June July August 8,400 units 9,300 units 6,100 units • All sales are on account. The company's collection experience has been that 42% of a month's sales are collected in the month of sale, 51% are collected in the month following the sale, and 7% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $146,880 on March 31, 2019. • Management's policy is to maintain ending finished goods inventory each month at a level equal to 51% of the next month's budgeted sales. The finished goods inventory on March 31, 2019, is expected to be 3,570 units. • To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 43% of the next month's estimated usage. The raw materials inventory is expected to be 18,340 pounds on March 31, 2019. • The cost per pound of raw material is $6.00, and 73% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable balance for raw material purchases is expected to be $60,672 on March 31, 2019.
Soprano Co. is in the process of preparing the second quarter budget for 2019, and the following data have been assembled: • The company sells a single product at a selling price of $45 per unit. The estimated sales volume for the next six months is as follows: March April May 6,400 units 7,000 units 10,000 units June July August 8,400 units 9,300 units 6,100 units • All sales are on account. The company's collection experience has been that 42% of a month's sales are collected in the month of sale, 51% are collected in the month following the sale, and 7% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $146,880 on March 31, 2019. • Management's policy is to maintain ending finished goods inventory each month at a level equal to 51% of the next month's budgeted sales. The finished goods inventory on March 31, 2019, is expected to be 3,570 units. • To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand at the end of each month to equal 43% of the next month's estimated usage. The raw materials inventory is expected to be 18,340 pounds on March 31, 2019. • The cost per pound of raw material is $6.00, and 73% of all purchases are paid for in the month of purchase; the remainder is paid in the following month. The accounts payable balance for raw material purchases is expected to be $60,672 on March 31, 2019.
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 4P
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Concept explainers
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
100%
Transcribed Image Text:Answer is complete and correct.
April
Мay
June
Total
Expected sales in units
7,000
10,000
8,400
25,400
Selling price per unit
$
$ 315,000
45
$
45
2$
45
45
Total sales
$
450,000
$
378,000
$ 1,143,000
b. Prepare a schedule of cash collections from sales, by month and in total, for the second quarter of 2019.
X Answer is not complete.
Cash collections from:
April
Мay
June
Total
March sales
146,880
April sales
May sales
June sales
Total cash collections
146,880
$
0 $
Transcribed Image Text:Soprano Co. is in the process of preparing the second quarter budget for 2019, and the following data have been assembled:
• The company sells a single product at a selling price of $45 per unit. The estimated sales volume for the next six months is as
follows:
6,400 units
7,000 units
10,000 units
8,400 units
9,300 units
6,100 units
March
April
Мay
June
July
August
• All sales are on account. The company's collection experience has been that 42% of a month's sales are collected in the month of
sale, 51% are collected in the month following the sale, and 7% are uncollectible. It is expected that the net realizable value of
accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $146,880 on March 31, 2019.
Management's policy is to maintain ending finished goods inventory each month at a level equal to 51% of the next month's
budgeted sales. The finished goods inventory on March 31, 2019, is expected to be 3,570 units.
• To make one unit of finished product, 5 pounds of materials are required. Management's policy is to have enough materials on hand
at the end of each month to equal 43% of the next month's estimated usage. The raw materials inventory is expected to be 18,340
pounds on March 31, 2019.
• The cost per pound of raw material is $6.00, and 73% of all purchases are paid for in the month of purchase; the remainder is paid
in the following month. The accounts payable balance for raw material purchases is expected to be $60,672 on March 31, 2019.
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