Should doggy world prepare the master budget briefly

Question

1. Doggy World operates a chain of pet stores in the Midwest. The manager of each store reports to the regional manager, who, in turn, reports to the headquarters in Milwaukee, Wisconsin. The actual income statements for the Dayton store, the Ohio region (including the Dayton store), and the company as a whole (including the Ohio region) for July 2011 are as follows:

 

 

Doggy World Income Statement Forthe month ended July 31, 2011
		Dayton	Ohio	Companywide
Revenue		$158,400	$1,760,000	$4,400,000
Expenses:
	Regional manager/headquarters office		$8,000	$122,000
	Cost of materials	85536	880000	1760000
	Salary Expense	41184	440000	1E0000
	Depredation Expense	7800	91000	439000
	Utilities Expense	4000	46600	261000
	Rent Expense	7500	34500	178000
Tots Expenses		1411120	$1,500,100	$3,863,000
Operating Income		$17380	$239,900	$537,000

 

 

Budgeted Amounts for July were as follows:

 

 

Doggy World Budgeted Income Statemert Forthe month ended July 31, 2011
		Dayton	Ohio	Companywide
Revenue		$173,400	$1,883,000	$4,650,000
Expenses:
	Regional manager/headquarters office		$61,600	$124,000
	Cost of materials	91902	11135650	209-EA°
	Salary Expense	41616	470750	1_16;500
	Depredation Expense	7800	87500	446000
	Utilities Expense	4900	54600	274000
	Rent Expense	3400	32700	1159000
Tots Expenses		149618	$1,745,8	$4,268,000
Operating Income		$23,782	$137200	$ 282,000

 

 

1. Prepare a report for July 2011 that shows the performance of the Dayton store, the Ohio region, and the company as a whole. Follow the format of below:

 

 

CEO'S QUARTERLY RESPONSIBILITY REPORT (in millions of dollars)
Operating Income of Divisions and Co rporate Headquarters Expense	Budget	Actual	Variance Favorable/ (Unfavorable)
Downloads	$218	$209	$ (9)
Media	70	S4	14
Other	79	87	8
International Media	35	34	(1)
Corporate Headquarters Expense	(33)	(29)	4
Operating Income	$369	$385	$16

 

 

VP-MEDIA QUARTERLY RESPONSIBILITY REPORT (in millions of dollars)
Operating Income of Product lines	Budget	Actual	Variance Favorable/ (Unfavorable)
CDs	25	38
DVDs	45	46
Operating Income	S70	$84	$ 14

 

 

MANAGER-CDs QUARTERLY RESPONSIBILITY REPORT (in millions of dollars)
			Variance Favorable/
Revenue and Expenses	Budget	Actual	jUn favorable)
Sales revenue	$ 80	$84	S 4
Cost of goods sold	(36)	(29)	6
Gross profit	44	54	10
Marketing expenses	(12)	(9)	3
Research and development expenses	(2)	(3)	(1)
Other expenses	(5)	(4)	1

 

 

2. As the Ohio regional manager would you investigate the Dayton store on the basis of this report? Why or why not?

 

3. Should Doggy World prepare the master budget? Briefly discuss the benefits of budgeting. Base your discussion on Doggy World's performance report.

 

II. The budget committee of Clipboard Office Supply has assembled the following data. As the business manager, you must prepare the budgeted income statements for May and June 2011.

 

a. Sales in April were $50,000. You forecast that monthly sales will increase 2.0% in May and 2.4% in June.

 

b. Clipboard maintains inventory of $9,000 plus 25% of the sales revenue budgeted for the following month. Monthly purchases average 50% of sales revenue in that same month. Actual inventory on April 30 is $13,000. Sales budgeted for July are $65,000.

 

c. Monthly salaries amount to $3,000. Sales commissions equal 4% of sales for that month. Combine salaries and commissions into a single figure.

 

 

d. Other monthly expenses are as follows:

 

Rent Expense	$2600 paid as Marred
Depreciation Expense	$300
Insurance Expense	$200 expiation of prepaid nitwit
Income Tax	20% of operating income

 

 

1. Prepare Clipboard Office Supply's budgeted income statements for May and June. Show cost of goods sold computations. Round all amounts to the nearest $100. (Round amounts ending in $50 or more upward, and amounts ending in less that %50 downward.) For example, budgeted May sales are $51,000 ($50,000 x 1.02), and June sales are $52,000 ($51,000 x 1.024)

 

 

III. Refer to 2. Clipboard Office Supply's sales are 75% cash and 25% credit. (Use the rounded sales values.) Credit sales are collected in the month after sale. Inventory purchases are paid 25% in the month of purchase and 75% the following month. Salaries and sales commissions are also paid half in the month earned and half the next month. Income tax is paid at the end of the year.

 

 

The April 30, 2011 balance sheet showed the following balances:

 

Cash	$25.00
Accounts Payable	$53,000
Salaries and Comrrissions Payable	2,500

 

1. Prepare schedules of (a) budgeted cash collections, (b) budgeted cash payments for purchases, and (c) budgeted cash payments for operating expenses. Show amounts for each month and totals for May and June. Round your computations to the nearest dollar.

 

 

2. Prepare a cash budget similar to

 

 

Exhibit 1

 

 

GREG'S GROOVY TUNES, INC Cash Budget Four Months Ending July 31, 2010
	April	May	June	July
Ikstinning cash balance	$15.000*	$10.550	$10,410	$18,235
Cash collections i Exhibit 21- I I,	40.W0	68.000	68.000	54.000
Cash available	$ 61.000	S 78.550	S 78.410	S 72.235
Cash payments:
Purchases of inventory (Exhibit 21.121	$ 42,700	S 48.300	S 40,600	S 32.900
Operating expenses !Exhibit 21-13)	13.750	18.250	18.000	15.250
Purchase of delivery crock	3.000	-	-	-
Total cash payments	59.450	66.550	58.600	48.150
II) Embuscash balance before financing	1,550	12,000	19,810	24.085
I ebs; Min im um cash balance sit-sires!	110.0001	110.0001	(10.000)	110.000)
Cash excess (deficiency)	$18.4501	$ 2.000	$ 9.810	$ 14.0135
Financing of cash deficiency flee notes a-c1:
Borrowing (at cm, of month)	$ 9,000
Principal payments (at end of month)		$ (1500)	$ 11.500/	$ 11,500)
interest expense (at 12% annually)		(90)	(75)	(60)
12) Total effects of financing	9.000	(1590)	(1,575)	(1560)
Ending cash balance (1) + 12)	$ 10.550	$ 10.410	$18,235 1	$ 22,525

 

 

If no financing activity took place, what is the budgeted cash balance on June 30, 2011?