Budgeting Edwin Company sells beach towels. Unit sales projections for the upcoming two months are as...

  
 
 

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Budgeting Edwin Company sells beach towels. Unit sales projections for the upcoming two months are as follows. Edwin sells each towel at a price of $15. Month May Sales Projections in Units 18,000 21,000 June Edwin expects that 75% of sales will be for cash and 25% will be on account. The company expects to collect 100% of the accounts receivable generated by credit sales in the month following the sale. Sales on account for the month of April were $54,000. Prepare a Sales Budget. Step 1: Sales Budget Calculations May Calculations June Section 1- Projected Sales Cash Sales Sales on Account Total Budgeted Sales Section 2- Schedule of Cash Receipts Current Cash Sales Plus: Collection of Accts Receivable Total Budgeted Collections Step 2: Inventory Purchases Budget Use the information from Step 1 and the following assumptions to prepare the Inventory Purchases Budget: Edwin's Budgeted COGS normally equals 60% of Total Budgeted Sales (see Step 1). • Edwin desired ending inventory each month should be equal to 20% of next month's budgeted COGS. Budgeted COGS in July is $194,000. • All inventory purchases are on account. Edwin's supplier requires 70% of the purchases to be paid for in the month of purchase. Edwin pays the remaining (30%) in the month after purchase. Edwin is scheduled to pay $32,000 in May for purchases made in April. Calculations May Calculations June Section 1: Projected Purchases Budgeted COGS Plus: Desired Ending Inventory Total Inventory Needed Hint: April's ending inventory would be May's beginning inventory (20%x May COGS) Less: Beginning Inventory Required Purchases (on account) Section 2: Schedule of Cash Payments Current Month's A/P Prior Month's A/P Budgeted Disbursements Step 3: Selling and Administrative (S&A) Expense Budget Edwin expects the following S&A expenses for the months of May and June. Cash paid for all S&A expenses are remitted in the month incurred. See completed budget below. No calculations necessary. May June Section 1- Projected S&A Wages $98,000 $98,000 Rent 7,000 7,000 Utilities 1,200 1,500 Total S&A Expenses before $106,200 $106,500 Interest Section 2- Schedule of Cash Pymts $106,200 $106,500 Step 4: Prepare a Cash Budget Prepare a Cash Budget with the following assumptions: • Edwin's cash balance at the end of April was $31,000. • Edwin wishes to maintain a cash balance of at least $30,000 at the end of each month. • Edwin currently has a line of credit with a local bank. The balance of the line of credit was $150,000 at the end of April and May. The bank charges interest at a rate of 6% annually on the outstanding balance. Interest payments are paid monthly on the previous month's balance. Edwin can borrow up to $250,000 on this Line of Credit. When calculating the monthly interest on the Line of Credit, use the following formula for each month: Outstanding Balance x Rate x 1/12 In June, Edwin purchased new machinery to upgrade its inventory storage and delivery system. The cost of this new machinery was $75,000. Calculations May Calculations June Section 1- Cash Receipts Beginning Cash Balance Add: Cash Receipts Total Cash Available Section 2- Cash For Inventory Purchases For S&A Expenses Interest Expense Purchase of Machinery Total Disbursements Section 3: Financing Surplus (Shortage) Borrowing-Line of Credit Ending Cash Balance Step 5: Prepare a Pro Forma Income Statement: All of these amounts can be found from earlier steps. Calculations May Calculations June Sales Revenue Cost of Goods Sold Gross Margin Selling & Administrative Expenses Operating Income Interest Expense Net income (Loss) Budgeting Edwin Company sells beach towels. Unit sales projections for the upcoming two months are as follows. Edwin sells each towel at a price of $15. Month May Sales Projections in Units 18,000 21,000 June Edwin expects that 75% of sales will be for cash and 25% will be on account. The company expects to collect 100% of the accounts receivable generated by credit sales in the month following the sale. Sales on account for the month of April were $54,000. Prepare a Sales Budget. Step 1: Sales Budget Calculations May Calculations June Section 1- Projected Sales Cash Sales Sales on Account Total Budgeted Sales Section 2- Schedule of Cash Receipts Current Cash Sales Plus: Collection of Accts Receivable Total Budgeted Collections Step 2: Inventory Purchases Budget Use the information from Step 1 and the following assumptions to prepare the Inventory Purchases Budget: Edwin's Budgeted COGS normally equals 60% of Total Budgeted Sales (see Step 1). • Edwin desired ending inventory each month should be equal to 20% of next month's budgeted COGS. Budgeted COGS in July is $194,000. • All inventory purchases are on account. Edwin's supplier requires 70% of the purchases to be paid for in the month of purchase. Edwin pays the remaining (30%) in the month after purchase. Edwin is scheduled to pay $32,000 in May for purchases made in April. Calculations May Calculations June Section 1: Projected Purchases Budgeted COGS Plus: Desired Ending Inventory Total Inventory Needed Hint: April's ending inventory would be May's beginning inventory (20%x May COGS) Less: Beginning Inventory Required Purchases (on account) Section 2: Schedule of Cash Payments Current Month's A/P Prior Month's A/P Budgeted Disbursements Step 3: Selling and Administrative (S&A) Expense Budget Edwin expects the following S&A expenses for the months of May and June. Cash paid for all S&A expenses are remitted in the month incurred. See completed budget below. No calculations necessary. May June Section 1- Projected S&A Wages $98,000 $98,000 Rent 7,000 7,000 Utilities 1,200 1,500 Total S&A Expenses before $106,200 $106,500 Interest Section 2- Schedule of Cash Pymts $106,200 $106,500 Step 4: Prepare a Cash Budget Prepare a Cash Budget with the following assumptions: • Edwin's cash balance at the end of April was $31,000. • Edwin wishes to maintain a cash balance of at least $30,000 at the end of each month. • Edwin currently has a line of credit with a local bank. The balance of the line of credit was $150,000 at the end of April and May. The bank charges interest at a rate of 6% annually on the outstanding balance. Interest payments are paid monthly on the previous month's balance. Edwin can borrow up to $250,000 on this Line of Credit. When calculating the monthly interest on the Line of Credit, use the following formula for each month: Outstanding Balance x Rate x 1/12 In June, Edwin purchased new machinery to upgrade its inventory storage and delivery system. The cost of this new machinery was $75,000. Calculations May Calculations June Section 1- Cash Receipts Beginning Cash Balance Add: Cash Receipts Total Cash Available Section 2- Cash For Inventory Purchases For S&A Expenses Interest Expense Purchase of Machinery Total Disbursements Section 3: Financing Surplus (Shortage) Borrowing-Line of Credit Ending Cash Balance Step 5: Prepare a Pro Forma Income Statement: All of these amounts can be found from earlier steps. Calculations May Calculations June Sales Revenue Cost of Goods Sold Gross Margin Selling & Administrative Expenses Operating Income Interest Expense Net income (Loss)

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Edwin Company Sales Budget Step 11 Calculation May June 2 Months ay June Cash sales 202500 236250 43... View the full answer