CRAVAT SALES COMPANY-Budgets
QUESTION
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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