You are the managerial accountant at Reliable Company. You have been assigned to support the marketing department
Question:
You are the managerial accountant at Reliable Company. You have been assigned to support the marketing department and manage its master budget. The marketing department is responsible for the following:
- Managing the firm's marketing
- Hiring subcontractors
- Selling the consulting expertise to smaller outside firms
The department's expenses are as follows:
- Salaries and benefits of $48,000/month
- Web site operations of $21,000/ month
- Online advertising expenses of $15,000/month
- Miscellaneous expenses of $3,500/month
The sales forecast for its consulting services are as follows:
- April: $190,000
- May: $200,000
- June: $205,000
The department pays a sales commission of 5%, and this is paid in the following month. Subcontractor expenses are estimated at 45% of sales and are paid the month after they are billed. Consulting fees are collected 20% in the month of sale, 70% in the following month, and 10% in the second month following sale.
Develop a master budget for the marketing department includes the following:
- Completing the attached schedules for a master budget for the marketing department
- Supporting schedules for cash disbursements and collections
Analyze additional needs and resources based on those budgets. Make recommendations based on those budgets.
Respond to the following:
- Develop the marketing department's master budget.
- Prepare a schedule of expected cash collections.
- Make recommendations based on those budgets.
Reliable Company Marketing Department Master Budget | |||
Data | April | May | June |
Budgeted consulting revenues | $ 190,000 | $ 200,000 | $ 205,000 |
Less: Sales commissions (5% of sales) | $ 9,500 | $ 10,000 | $ 10,250 |
Less: Cost of sales (45% of sales) | $ 85,500 | $ 90,000 | $ 92,250 |
Net consulting revenues | $ 95,000 | $ 100,000 | $ 102,500 |
Accounts Receivable Collections | |||
Month of sale | 20% | ||
Month following sale | 70% | ||
The second month following sale | 10% | ||
Monthly Budgeted Expenses | |||
Salaries and benefits | $ 48,000 | ||
Web site operations | $ 21,000 | ||
Online advertising expenses | $ 15,000 | ||
Other misc. expenses | $ 3,500 | ||
Accounts Payable Payments | |||
Month of sale | 40% | ||
Month following sale | 60% | ||
Accounts Payable | |||
Online advertising expenses | $ 15,000 |
Marketing Department Master Budget | |
June | |
Consulting Revenues | |
Less: Commissions | |
Less: Subcontractor expenses | |
Net revenues | |
Expenses | |
Salaries and benefits | |
Web site operations | |
Online advertising expenses | |
Other misc. expenses | |
Total expenses | |
Net department expenses | |
Expected Cash Collections | |
June collections on account: | |
April sales | |
May sales | |
June sales | |
Total cash collections | |
Expected Cash Disbursements | |
Salaries and benefits | |
Web site operations | |
Other misc. expenses | |
Online advertising expenses | |
Sales commissions (5% of sales) | |
Cost of sales (45% of sales) | |
Total cash disbursements | |
The net impact on cash |