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Unici Company is a retail company that specializes in selling outdoor camping equipment. The...

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Unici Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store or October 1, 2006. The company president formed a planning committee to prepare a master budget for the first three months of operation. He assigned you. the budget coordinator, and the following tasks.

Required:

a. October sales are estimated to be $120,000 of which 40 percent will be cash and 60 percent will be credit. The company expects sales to Increase at a rate of 25 percent per month. Prepare a sales budget.

b. The company expects to collect 100 percent of the accounts receivable generated by credit sales in the month following the sale. Prepare a schedule of cash receipts.

c. The cost of goods sold is 60 percent of sales. The company desires to maintain a minimum ending Inventory equal to 10 percent of the next month's cost of goods sold. Ending inventory at December 31 is expected to be $12,000. Assume that all purchases are made on the account. Prepare an inventory purchases budget.

d. The company pays 70 percent of accounts payable in the month of purchase and the remaining 30 percent in the following month. Prepare a cash payments budget for inventory purchases.

e. Budgeted selling and administrative expenses per month following.

Salary expense ( fixed) $18,000
Sales commissions 5 percent of sales
Supplies expense 2 percent of sales
Utilities ( Fixed) $1,400
Depreciation on store Equipment ( fixed) $4,000
Rent ( Fixed) $4,800
Miscellaneous ( fixed) $1,200

The capital expenditures budget indicates that Unici will spend $164,000 on October 1 for store fixtures, which are expected to have a $20,000 salvage value and a three-year (36-month) useful life.

Use this information to prepare a selling and administrative expenses budget.

f. Utilities and sales commissions are paid the month after they are incurred; all other expenses are paid in the month in which they are incurred. Prepare a cash payments budget for selling and administrative expenses.

g. Unici borrows funds, in increments of $1,000, and repays them on the last day of the month. The company also pays its vendors on the last day of the month, it pays interest of 1 percent per month in cash on the last day of the month. To be prudent, the company desires to maintain a $12,000 cash cushion. Prepare a cash budget.

h. Prepare a pro forma income statement for the quarter.

i. Prepare a pro forma balance sheet at the end of the quarter.

j. Prepare a pro forma statement of cash flows for the quarter.

Direct Labor Budget:

Direct labor budget is based on the production budget which is based on the sales budget. When estimating the required direct labor cost, the production should be multiplied with the required direct labor hours per unit produced. The direct labor hours computed shall be multiplied to the direct labor rate to et the total direct labor cost.

Answer and Explanation: 1

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a. Prepare a sales budget.

Sales-October120,000
Increase1.25
Sales-November150,000
Increase1.25
Sales-December187,500


b. Prepare a schedule of...

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Sales Budget: Definition & Examples

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Chapter 11 / Lesson 4
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Learn about the sales budget. Understand what a sales budget is, learn how to make a sales budget, identify the importance of the sales budget, and see examples.


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