31Hi-value Products Company is creating an operating budget for the 3rd
quarter and will begin with a sales budget. Budgeted sales are $100,000 in July, $120,000 in August, and $160,000 in September. 75% of sales are cash and 25% of sales are on account. Please use the following format and prepare a sales budget.
Sales Budget
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Jul
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Aug
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Sep
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Cash sales: 75%
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Credit sales: 25%
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Total sales
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32Hi-value Products Company is creating an operating budget for the 3rd
quarter. Budgeted sales are $100,000 in July, $120,000 in August, $160,000 in September, and $200,000 in October. Cost of goods sold is 60% of sales. The desired ending inventory is 50% of the Cost of goods sold for the following month, plus a “safety cushion” of $2,000.
The inventory balance at the end of June was $50,000. Using the format below, please prepare a budget for Inventory, Purchases and Cost of goods sold.
Inventory, Purchases and C.O.G.S. Budget
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Jul
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Aug
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Sep
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Cost of goods sold (a)
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Desired ending inventory(b)
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Total inventory required
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less Beginning inventory
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Purchases
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(a) COGS = 60% of sales
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(b) $2,000 + 50% of COGS for next month
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33Hi-value Products Company is creating an operating budget for the 3rd quarter, and is now preparing the operating expense budget. Assumptions for operating expenses are as follows:
Miscellaneous expense – variable portion: 10% of sales revenue
Miscellaneous expense – fixed portion: $4,200 per month
Salary expense – fixed: $12,000 per month
Rent expense – fixed: $8,000 per month
Depreciation expense – fixed: $5,600 per month
Sales for July, August and September were budgeted at $100.000, $120,000, and $160,000.
Using the format below, please prepare an operating expense budget.
Operating Expenses Budget
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Jul
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Aug
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Sep
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Variable operating expenses:
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Misc. expense (10% of sales)
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Total variable expenses
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Fixed operating expenses:
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Salary expense
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Rent expense
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Depreciation expense
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Misc. expense (fixed portion)
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Total fixed expenses
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Total operating expenses
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34Hi-value Products Company is creating an operating budget for the 3rd quarter. Please review the following budgets:
Sales Budget
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Jul
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Aug
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Sep
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Cash sales: 75%
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$75,000
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$90,000
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$120,000
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Credit sales: 25%
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25,000
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30,000
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40,000
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Total sales
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$100,000
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$120,000
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$160,000
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Inventory, Purchases and COGS. Budget
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Jul
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Aug
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Sep
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Cost of goods sold
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$60,000
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$72,000
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$96,000
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Desired ending inventory
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38,000
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50,000
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62,000
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Total inventory required
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98,000
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122,000
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158,000
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less Beginning inventory
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(50,000)
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(38,000)
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(50,000)
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Purchases
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$48,000
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$84,000
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$108,000
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Operating Expenses Budget
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Jul
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Aug
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Sep
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Variable operating expenses:
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Misc. expense (10% of sales)
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$10,000
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$12,000
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$16,000
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Total variable expenses
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10,000
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12,000
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16,000
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Fixed operating expenses:
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Salary expense
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12,000
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12,000
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12,000
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Rent expense
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8,000
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8,000
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8,000
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Depreciation expense
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5,600
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5,600
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5,600
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Misc. expense (fixed portion)
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4,200
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4,200
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4,200
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Total fixed expenses
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29,800
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29,800
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29,800
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Total operating expenses
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$39,800
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$41,800
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$45,800
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Using the format below, please prepare a budgeted income statement.
Budgeted Income Statement
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Jul
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Aug
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Sep
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Sales revenue
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Cost of goods sold
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Gross profit
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Variable operating expenses:
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Misc. expense
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Total variable expenses
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Contribution margin
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Fixed operating expenses
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Salary expense
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Rent expense
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Depreciation expense
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Misc. expense (fixed portion)
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Total fixed expenses
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Operating income/(loss)
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Interest expense
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Net income/(loss)
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