XYZ Company”s budgeted for 1st quarter 2017 are as follows Sales Direct Material Purchases Direct labor Manufacturing Overhead january $100,000 $15,000 $12,000 $9,000 february $120,000 $18,000 $14,400 $10,800 march $125,000 $19,000 $15,200 $17,100 The January 1, 2017, cash balance XYZ Company is expected to be $25,000 and wishes to maintain a balance of at least $20,000. Sales 50% are collected in the month sold and 50% are collected in the following month. In February, sales of marketable securities are expected to realize $5,000 in cash. For direct material 35% are paid in the quarter purchased and 65% are paid in the following month. Wages and manufacturing overhead is paid in the month incurred, which manufacturing overhead includes depreciation of $1,000 per month. XYZ Company’s purchase of a truck in February for $15,000 cash. Selling and administrative expenses are $20,000 in January with 10% increased each month. These costs are exclusive of depreciation and paid as incurred. XYZ Company also estimated $6,000 as first quarter income taxes. Instructions (a) Prepare the following schedules for each month in the first quarter of 2017 and for the quarter in total: (1) Expected collections from customers (2) Expected payments for direct materials. (b) Prepare a monthly cash budget for 1st quarter 2017
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.
1. XYZ Company”s budgeted for 1st quarter 2017 are as follows
|
|
Sales |
Direct Material Purchases |
Direct labor |
Manufacturing Overhead |
|
january |
$100,000 |
$15,000 |
$12,000 |
$9,000 |
|
february |
$120,000 |
$18,000 |
$14,400 |
$10,800 |
|
march |
$125,000 |
$19,000 |
$15,200 |
$17,100 |
The January 1, 2017, cash balance XYZ Company is expected to be $25,000 and wishes to maintain a balance of at least $20,000. Sales 50% are collected in the month sold and 50% are collected in the following month. In February, sales of marketable securities are expected to realize $5,000 in cash. For direct material 35% are paid in the quarter purchased and 65% are paid in the following month. Wages and manufacturing overhead is paid in the month incurred, which manufacturing overhead includes depreciation of $1,000 per month. XYZ Company’s purchase of a truck in February for $15,000 cash. Selling and administrative expenses are $20,000 in January with 10% increased each month. These costs are exclusive of depreciation and paid as incurred. XYZ Company also estimated $6,000 as first quarter income taxes.
Instructions
(a) Prepare the following schedules for each month in the first quarter of 2017 and for the quarter in total:
(1) Expected collections from customers
(2) Expected payments for direct materials.
(b) Prepare a monthly
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