Exercise 8-1: Schedule of Expected Cash Collections
Given:
Peak sales for Midwest Products, a wholesale distributor of leaf rakes, occur in August. The
company's sales budget for the third quarter showing these peak sales is given below:
May June July August September Total
Budgeted Sales (All on Account) $600.000 $900.000 $500.000 $2.000.000
Actual Sales (All on Account) $430.000 $540.000
Total Sales $430.000 $540.000 $600.000 $900.000 $500.000 $2.970.000
From past experience, the company has learned that 20% of a month's sales are collected in the
month of sale, another 70% are collected in the month following the sale, and the remaining 10% are
collected in the second month following the sale. Bad debts are negligible and can be ignored.
Required:
1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third
quarter.
May June July August September Total
20% collected in month of sale $86.000 $108.000 $120.000 $180.000 $100.000 $400.000
70% collected in month after sale 301.000 378.000 420.000 630.000 1.428.000
10% collected in 2nd month after 43.000 54.000 60.000 157.000
Total $86.000 $409.000 $541.000 $654.000 $790.000 $1.985.000
2. Assume that the company will prepare a budgeted balance sheet as of September 30. Compute
the A/R as of that date.
Accounts Receivable -- September 30: %
Uncollected A/R
From August Sales: $900.000 10% $90.000
From September Sales: $500.000 80% 400.000
Total A/R $490.000
Check:
Total Sales: $2.970.000 Cell "K11"
Less Total Collections: 2.480.000 Sum of F26 to J26
Accounts Receivable -- September 30: $490.000
, Exercise 8-2: Production Budget
Given:
Crystal telecom has budgeted the sales of its innovative mobile phone over the next four months as
follows:
Unit
Sales
July 30.000
August 45.000
September 60.000
October 50.000
The company is now in the process of preparing a production budget for the third quarter. Past
experience has shown that end-of-month inventories of finished goods must equal 10% of the next
month's sales. The inventory at the end of June was 3,000.
Required:
Prepare a production budget for the third quarter showing the number of units to be produced each
month and for the quarter in total.
July August September Quarter October
Budgeted Sales 30.000 45.000 60.000 135.000 50.000
Desired EI** 4.500 6.000 5.000 15.500
Total Units Desired 34.500 51.000 65.000 150.500
Less BI 3.000 3.000 3.000 3.000
Production 31.500 48.000 62.000 141.500
5.000
** EI is anticipated to be 10% of the next month's sales
Given:
Peak sales for Midwest Products, a wholesale distributor of leaf rakes, occur in August. The
company's sales budget for the third quarter showing these peak sales is given below:
May June July August September Total
Budgeted Sales (All on Account) $600.000 $900.000 $500.000 $2.000.000
Actual Sales (All on Account) $430.000 $540.000
Total Sales $430.000 $540.000 $600.000 $900.000 $500.000 $2.970.000
From past experience, the company has learned that 20% of a month's sales are collected in the
month of sale, another 70% are collected in the month following the sale, and the remaining 10% are
collected in the second month following the sale. Bad debts are negligible and can be ignored.
Required:
1. Prepare a schedule of expected cash collections from sales, by month and in total, for the third
quarter.
May June July August September Total
20% collected in month of sale $86.000 $108.000 $120.000 $180.000 $100.000 $400.000
70% collected in month after sale 301.000 378.000 420.000 630.000 1.428.000
10% collected in 2nd month after 43.000 54.000 60.000 157.000
Total $86.000 $409.000 $541.000 $654.000 $790.000 $1.985.000
2. Assume that the company will prepare a budgeted balance sheet as of September 30. Compute
the A/R as of that date.
Accounts Receivable -- September 30: %
Uncollected A/R
From August Sales: $900.000 10% $90.000
From September Sales: $500.000 80% 400.000
Total A/R $490.000
Check:
Total Sales: $2.970.000 Cell "K11"
Less Total Collections: 2.480.000 Sum of F26 to J26
Accounts Receivable -- September 30: $490.000
, Exercise 8-2: Production Budget
Given:
Crystal telecom has budgeted the sales of its innovative mobile phone over the next four months as
follows:
Unit
Sales
July 30.000
August 45.000
September 60.000
October 50.000
The company is now in the process of preparing a production budget for the third quarter. Past
experience has shown that end-of-month inventories of finished goods must equal 10% of the next
month's sales. The inventory at the end of June was 3,000.
Required:
Prepare a production budget for the third quarter showing the number of units to be produced each
month and for the quarter in total.
July August September Quarter October
Budgeted Sales 30.000 45.000 60.000 135.000 50.000
Desired EI** 4.500 6.000 5.000 15.500
Total Units Desired 34.500 51.000 65.000 150.500
Less BI 3.000 3.000 3.000 3.000
Production 31.500 48.000 62.000 141.500
5.000
** EI is anticipated to be 10% of the next month's sales
