Question

Watercooler Office Supply’s March 31, 2016, balance sheet follows:
The budget committee of Watercooler Office Supply has assembled the following data.
a. Sales in April are expected to be $140,000. Watercooler forecasts that monthly sales will increase 2% over April sales in May. June’s sales will increase by 4% over April sales. July sales will increase 20% over April sales. Cash receipts are 80% in the month of the sale and 20% in the month following the sale.
b. Watercooler maintains inventory of $9,000 plus 25% of the cost of goods sold budgeted for the following month. Cost of goods sold equal 50% of sales revenue. Purchases are paid 30% in the month of the purchase and 70% in the month following the purchase.
c. Monthly salaries amount to $5,000. Sales commissions equal 5% of sales for that month. Salaries and commissions are paid 70% in the month incurred and 30% in the following month.
d. Other monthly expenses are as follows:
• Rent: $3,000, paid as incurred
• Depreciation: $700
• Insurance: $300, expiration of prepaid amount
• Income tax: $2,000, paid as incurred
Requirements
1. Prepare Watercooler’s sales budget for April and May 2016. Round all amounts to the nearest dollar.
2. Prepare Watercooler’s inventory, purchases, and cost of goods sold budget for April and May.
3. Prepare Watercooler’s selling and administrative expense budget for April and May.


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  • CreatedJune 15, 2015
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