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BA 115 - Master Budgeting Exercises

The document provides information to calculate budgeted cash receipts, raw materials purchases, sales, production, direct materials costs, cash borrowing needs, and ending cash balance for a company. It includes budgeted figures for sales, production, expenses, cash balances, and accounts receivable for multiple periods. Calculations are shown to determine cash receipts for July, raw materials needs for June, sales and production by quarter for 2020 and 2021, direct materials costs by quarter for 2020, cash borrowing for March, and ending cash balance for the first quarter.

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Lance Estopen
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719 views2 pages

BA 115 - Master Budgeting Exercises

The document provides information to calculate budgeted cash receipts, raw materials purchases, sales, production, direct materials costs, cash borrowing needs, and ending cash balance for a company. It includes budgeted figures for sales, production, expenses, cash balances, and accounts receivable for multiple periods. Calculations are shown to determine cash receipts for July, raw materials needs for June, sales and production by quarter for 2020 and 2021, direct materials costs by quarter for 2020, cash borrowing for March, and ending cash balance for the first quarter.

Uploaded by

Lance Estopen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Page 1 of 2

1. The company has the following budgeted sales for four months:
April $ 80,000
May 160,000
June 240,000
July 80,000

Fifty percent of total sales is cash sales. Credit sales are collected in the following manner:
70% in the month following the sale
20% in the second month following the sale
10% in the third month following the sale

How much is the budgeted cash receipts in July? Answer: $144,000

2. The company has the following budgeted production units for four months:
April 50,000
May 40,000
June 45,000
July 60,000

Each unit of product requires two pieces of raw materials. The desired ending raw materials inventory for each
month is 130% of the following month’s production needs plus 2,000 pieces. The April 1 inventory meets this
requirement. What is the budgeted units for purchase of raw materials in June? Answer: 129,000

3. Relevant data pertaining to the company’s sales, production, and direct materials budgets are as follows.

Sales for the year are expected to total 1,200,000 units. Quarterly sales, as a percentage of total sales, are 20%,
25%, 30%, and 25%, respectively. The sales price is expected to be $50 per unit for the first three quarters and
$55 per unit beginning in the fourth quarter. Sales in the first quarter of 2021 are expected to be 10% higher than
the budgeted sales for the first quarter of 2020.

Management desires to maintain the ending finished goods inventories at 25% of the next quarter’s budgeted
sales volume.

Each unit requires three pounds of raw materials at a cost of $5 per pound. Management desires to maintain raw
materials inventories at 5% of the next quarter’s production requirements. Assume the production requirements
for the first quarter of 2021 are 810,000 pounds.

How much are the budgeted sales, production units, and cost of direct material purchases per quarter in 2020?

Answer:
Sales: Q1 = $12,000,000; Q2 = $15,000,000; Q3 = $18,000,000; Q4 = $16,500,000
Production units: Q1 = 255,000; Q2 = 315,000; Q3 = 345,000; Q4 = 291,000
Cost of direct material purchases: Q1 = $3,870,000; Q2 = $4,747,500; Q3 = $5,134,000; Q4 = $4,349,250

4. The company wants to maintain a minimum monthly cash balance of $15,000. At the beginning of March, the cash
balance is $16,500, expected cash receipts for March are $210,000, and cash disbursements are expected to be
$220,000. How much cash, if any, must be borrowed to maintain the desired minimum monthly balance?
Answer: 8,500

Not for reproduction / distribution; for classroom use only


Page 2 of 2

5. The company is preparing its cash budget for the first quarter with the following information:
Budgeted credit sales $ 640,000
Budgeted expenses 644,000
Cash (beginning balance) 40,000
Accounts receivable (beginning balance) 144,000
Accounts receivable (ending balance) 168,000

The amount of budgeted expenses includes depreciation of $20,000. How much is the budgeted cash balance at
the end of the first quarter? Answer: $32,000

Not for reproduction / distribution; for classroom use only

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