CRAVAT SALES COMPANY-Budgets

CRAVAT SALES COMPANY

Minimum
ending cash balance

$ 10,000

Selling
price (per unit)

$ 8.10

Recent
and forecast sales (in units):

January
(actual)

20,000

February
(actual)

24,000

March
(actual)

28,000

April

33,000

May

41,000

June

65,000

July

40,000

August

36,000

September

32,000

Desired
ending inventories (percentage

75%

of next month’s sales)

Cost
of ties (per unit)

$ 4.85

Purchases
paid as follows:

In month of purchase

50%

In following month

50%

Collection
on sales:

Sales collected current month

30%

Sales collected following month

60%

Sales collected 2nd month following

10%

Variable
monthly expenses:

Sales commissions (per tie)

$ 1.00

Fixed
monthly expenses:

Wages and salaries

$ 22,000

Utilities

$ 14,000

Insurance

$ 1,200

Depreciation

$ 1,500

Miscellaneous

$ 3,000

Land
purchased in May

$ 30,000

Dividends
declared each quarter

$ 12,000

Balance
sheet at March 31:

Assets

Cash

$ 14,000

Accounts
receivable

February sales

$ 19,440

March sales

1,58,760
1,78,200

Inventory
(24,750 units)

1,20,037.50

Prepaid
insurance

14,400

Fixed
assets, net of depreciation

1,72,700

Total assets

$ 4,99,337.50

Liabilities and Stockholders’
Equity

Accounts
payable

$ 76,993.75

Dividends
payable

12,000

Capital
stock

3,00,000

Retained
earnings

1,10,343.75

Total
liabilities and stockholders’ equity

$ 4,99,337.50

Agreement
with Bank:

Borrowing
increments

$ 1,000

Maximum
borrowing amount

$3,00,000

Interest
rate per month

1%

Repayment
increments

$ 1,000

Total
of interest paid each quarter

100%

Required
minimum cash balance

$ 12,000

Prepare following
budgets

1a. Sales budget:

1b. Schedule of
expected cash collections:

1c. Merchandise
purchases budget:

1d. Budgeted cash
disbursements for inventory purchases:

Cash Budget

Budgeted Income
Statement

Budgeted Balance
Sheet

 

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