Xcom is a small retailer that sells phone cases. The following estimates are available for the coming period:MonthBudgeted Sales (Units)April40,000May50,000June44,000Notes:Opening cash balance for the month of May is expected to be $9,250.Inventory policy- ending inventory of finished goods equal to 25% of that month’s sales.Budgeted selling price per case- $40Purchase price per case - $10 (purchase volume greater than 30,000 cases per month will receive a 5% discount).Collections from customers:80% in the month of sale20% one month after the saleMonthly operating expenses are budgeted at:Marketing $20,000 per monthSales commission (5% of Total Sales Collection for the month)Administration cost per month is $18,000. This includes depreciation of $2,000 per month.All expenses and purchases are paid in the month incurred unless otherwise specified. Required:For the month of May, you have been asked to prepare:Purchases budget in units and dollars Sales collection schedule Cash Budget

The budget is prepared to record the estimated expenses and revenues during the period.

Answered: Xcom is a small retailer that sells…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter15: Managing Short-term Assets

Section: Chapter Questions

Problem 1PROB

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Xcom is a small retailer that sells phone cases. The following estimates are available for the coming period:

Month	Budgeted Sales (Units)
April	40,000
May	50,000
June	44,000

Notes:

Opening cash balance for the month of May is expected to be $9,250.
Inventory policy- ending inventory of finished goods equal to 25% of that month’s sales.

Budgeted selling price per case- $40

Purchase price per case - $10 (purchase volume greater than 30,000 cases per month will receive a 5% discount).
Collections from customers:

80% in the month of sale
20% one month after the sale

Monthly operating expenses are budgeted at:

Marketing $20,000 per month
Sales commission (5% of Total Sales Collection for the month)
Administration cost per month is $18,000. This includes depreciation of $2,000 per month.
All expenses and purchases are paid in the month incurred unless otherwise specified.

Required:

For the month of May, you have been asked to prepare:

Purchases budget in units and dollars
Sales collection schedule
Cash Budget

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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