E22-24 Preparing an operating budget

E22-24 Preparing an operating budget
Dunbar Company manufactures drinking glasses. One unit is a
package of 8 glasses,
which sells for $20. Dunbar projects sales for April will be
3,000 packages, with
sales increasing by 100 packages per month for May, June,
and July. On April 1,
Dunbar has 250 packages on hand but desires to maintain an
ending inventory of
10% of the next month’s sales. Prepare a sales budget and a
production budget for
Dunbar for April, May, and June.

E22-27 Preparing a financial budget
Cramer Company projects the following sales for the first
three months of the
year: $12,500 in January; $13,240 in February; and $14,600
in March. The
company expects 70% of the sales to be cash and the remainder
on account. Sales
on account are collected 50% in the month of the sale and
50% in the following
month. The Accounts Receivable account has a zero balance on
January 1. Round
to the nearest dollar.

Preparing a financial budget
This problem continues the Davis
Consulting, Inc. situation from Problem P21-63 of
Chapter 21. Assume Davis Consulting
began January with $29,000 cash. Management
forecasts that cash receipts from
credit customers will be $49,000 in January and
$51,500 in February. Projected cash
payments include equipment purchases ($17,000
in January and $40,000 in February)
and selling and administrative expenses ($6,000
each month).
Davis’s bank requires a $20,000
minimum balance in the firm’s checking account.
At the end of any month when the
account balance falls below $20,000,
the bank automatically extends
credit to the firm in multiples of $5,000. Davis
borrows as little as possible and
pays back loans each month in $1,000 increments,
plus 5% interest on the entire
unpaid principal. The first payment occurs one
month after the loan.
1.Prepare Davis Consulting’s cash budget for January and
February 2013.
2.How much cash will Davis borrow in February if cash
receipts from customers
that month total $21,500 instead of $51,500?

E22A-32 Preparing an operating budget
Tremont, Inc. sells tire rims. Its sales budget for the nine
months ended September
30, 2014, follows:
Quarter Ended
March 31 June 30 September 30 Total
Cash sales, 20% $
24,000 $ 34,000 $ 29,000 $ 87,000
Credit sales, 80% 96,000
136,000 116,000 348,000
Total sales $ 120,000
$ 170,000 $ 145,000 $ 435,000

In the past, cost of goods sold has been 40% of total sales.
The director of marketing
and the financial vice president agree that each quarter’s
ending inventory
should not be below $20,000 plus 10% of cost of goods sold
for the following
quarter. The marketing director expects sales of $220,000
during the fourth quarter.
The January 1 inventory was $32,000. Prepare an inventory,
purchases, and cost of
goods sold budget for each of the first three quarters of
the year. Compute cost of
goods sold for the entire nine-month period.

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