Assignment Task:
Assignment Part A: Cover-UP! Incorporated buys mobile phone cases and then resells them through the company's website; each unit is purchased for $18 and then sold for $30.
The company had the following sales data available in units: July 6,000 (actual), August 6,000 (budget), September 9,000 (budget), October 4,000 (budget) and November 5,000 (budget). All sales are made on account and experience shows that 40% of sales are collected in the month of the sale and 60% in the month after the sale.
All product purchases made by the company are paid in full in the month of purchase. The company maintains ending inventory equal to 25% of the next month's unit sales and the company had 1,200 units in inventory on August 1st.
The company's advertising is considered a variable cost and is budgeted at $2 per unit based on the current month's sales. Administrative costs include rent for office space of $5,000 per month and salaries totaling $8,000 per month. The company plans on giving its employees a pay raise in September, which would increase salaries by $1,000 per month. All selling and administrative costs are paid in full each month.
The company's cash balance on August 1st is $40,000.
Required: Given the information above, prepare a sales budget, purchases budget, cash budget, budgeted income statement and a budgeted balance sheet (cash, accounts receivable and inventory sections only) for August and September.
Assignment Part B: The Earth Springs Corporation buys water reclamation and filtration systems then resells them for $1,000 per unit and plans to raise that price by $100 in May. The company had the following sales data available in units: February 1,100 (actual), March 1,000 (budget), April 1,300 (budget), May 1,400 (budget) and June 1,600 (budget). All sales are made on account and recent experience shows that 20% of sales are collected in the month of the sale and 80% in the month after the sale.
The company purchases its product for $800 per unit and all purchases are paid in full in the month the purchase is made. The company maintains ending inventory equal to 25% of the next month's unit sales and had 260 units in inventory on March 1st.
The company's advertising is fixed at $3,500 per month, has other administrative costs of $33,000 per month and salaries of $40,000 per month; all selling and administrative expenses are paid in full each month. The company plans to give its salaried employees a one-time bonus of $4,000 in April.
The company plans to purchase $150,000 of equipment in May and plans to take out a $100,000 loan in April to help fund the purchase.
The company's cash balance on February 28th is $35,000.
Required: Given the information above, prepare a sales budget, purchases budget, cash budget, budgeted income statement, cash budget and a budgeted balance sheet (for cash, accounts receivable, inventory and liabilities) for March, April and May.
Question 1: For Cover-UP!, what is the company's total dollar amount for budgeted sales for August?
Question 2: For Cover-UP!, what is the company's total dollar amount for budgeted purchases for August?
Question 3: For Cover-UP!, what is the company's budgeted ending cash for August?
Question 4: For Cover-UP!, what is the company's budgeted net income for September?
Question 5: For Cover-UP!, what is the company's total dollar amount for budgeted inventory for September?
Question 6: For Earth Springs, what is the company's total dollar amount for budgeted sales for May?
Question 7: For Earth Springs, what is the company's total dollar amount for budgeted purchases for April?
Question 8: For Earth Springs, what is the company's budgeted ending cash for May?
Question 9: For Earth Springs, what is the company's budgeted net income for April?
Question 10: For Earth Springs, what is the company's amount for budgeted accounts receivable for May?
Question 11: For Earth Springs, what is the company's amount for budgeted liabilities for May?