Question

Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 5 percent for peaches and 10 percent for oranges. The current year’s sales revenue data follow:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	227,000		$	247,000		$	307,000		$	247,000		$	1,028,000
Oranges		405,000			455,000			575,000			385,000			1,820,000
Total	$	632,000		$	702,000		$	882,000		$	632,000		$	2,848,000

Based on the company’s past experience, cost of goods sold is usually 60 percent of sales revenue. Company policy is to keep 15 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (Hint: Use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)

Required

1. Prepare the company’s sales budget for the next year for each quarter by individual product.

2. If the selling and administrative expenses are estimated to be $620,000, prepare the company’s budgeted annual income statement.

3. Ms.Jasper estimates next year’s ending inventory will be $35,800 for peaches and $57,800 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

Answer 1

Solution Required A. Company's sales budget for the next year for each quarter by individual product First Quarter Second Quarter $238,350 $445,500 $683,850 Third Quarter Fourth Quarter Total Peaches (WN-1) Oranges (WN-1) Total $1,079,400 $2,002,000 $3,081,400 $322,350 $632,500 $954,850 $259,350 $259,350 $423,500 $682,850 $500,500 $759,850 WN-1 First QuarterSecond Quarter Third Quarter Fourth Quarter Total Peaches (a) Current year's sales $227,000 $247,000 $307,000 $247,000 $1,028,000 revenue (b) Expected increase in next year (a x 5%) (c) Budgeted sales for next $11,350 $12,350 $12,350 $15,350 $51,400 $1,079,400 $238,350 $259,350 $322,350 $259,350 year (ab) Oranges (a) Current year's sales $405,000 $385,000 $1,820,000 $575,000 $455,000 revenue (b) Expected increase in $40,500 $45,500 $57,500 $38,500 $182,000 next year (ax 10%) (c) Budgeted sales for next year (a b) $45,500 $500,500 $632,500 $423,500 $2,002,000 Required B. Company's budgeted annual income statement JASPER FRUITS CORPORATION Budgeted Annual Income Statement $3,081,400 $1,848,840 $1,232,560 $620,000 Sales revenue Cost of goods sold ($3,081,400 x 60% ) Gross profit Selling and administrative expenses Net income $612,560 Required C: Company's inventory purchases budgets for Peaches Second Quarter Third Quarter Fourth Quarter $259,350 $155,610 $35,800 First Quarter $238,350 $143,010 $23,342 $166,352 $259,350 $155,610 $322,350 $193,410 Sales revenue Cost of goods sold (60%) Add: Ending inventory Inventory needed Less: Beginning inventory Required purchases $29,012 $23,342 $191,410 $23,342 $168,069 $216,752 $184,622 $23,342 $161,280 $21,452 $29,012 $187,740 $144,900 Company's inventory purchases budgets for Oranges First Quarter Second Quarter $445,500 Third Quarter Fourth Quarter $632,500 $379,500 Sales revenue $423,500 $254,100 $57,800 $311,900 $38,115 $500,500 Cost of goods sold (60 %) Add: Ending inventory $300,300 $267,300 $45,045 $56,925 $38,115 Inventory needed Less: Beginning inventory Required purchases $312,345 $357,225 $417,615 $40,095 $272,250 $45,045 $56,925 $312,180 $360,690 $273,785

To see the formulas, please see the below images:

C Е G Solution 2 Required A. Company's sales budget for the next year for each quarter by individual product 4 First QuarterSecond Quarter Third Quarter Fourth Quarter Total Peaches (WN-1) SUM(C6:F6) -SUM(C7:F7) =SUM(G6:G7) 6 -C16 ED16 -E16 -E21 -SUMID6:D7)=SUM(E6:E7) =F16 -F21 -SUMIF6:F7) Oranges (WN-1) Total 7 -C21 ED21 -SUM(C6:C7) 10 WN-1 11 12 First Quarter Second Quarter Third Quarter Fourth Quarter Total 13 Peaches (a) Current year's sales revenue 227000 -SUM(C14:F14) 247000 307000 247000 14 (b) Expected increase in -C14 5 % =D14 5 % -SUM(C15:F15) -E14 5% =F14 5% 15 next year (a x 5%) (c) Budgeted sales for next year (a+b) -E14+E15 -G14+G15 C14+C15 16 -D14+D15 =F14+F15 17 18 Oranges (a) Current year's sales 405000 575000 -SUM(C19:F19) 19 revenue 455000 385000 (b) Expected increase in -E19 10 % =F19 10 % -SUM(C20:F20) 20 C19 10 % -D19 . 10 % next year (a x 10 % ) (c) Budgeted sales for next year (ab 21 -C19+C20 -E19+E20 -G19+G20 =D19 + D20 =F19+ F20

E F G 23 Required B. Company's budgeted annual income statement 24 JASPER FRUITS CORPORATION 25 Budgeted Annual Income Statement 26 27 Sales revenue =G8 Cost of goods sold ($3,081,400 x 60%) =D27 60 % -D27-D28 28 29 Gross profit Selling and administrative expenses 30 620000 31 Net income D29-D30 32 Required C: Company's inventory purchases budgets for Peaches 33 34 First Quarter Second Quarter Third Quarter Fourth Quarter 35 36 Sales revenue %3С6 -D6 -E6 =F6 Cost of goods sold (60 %) Add: Ending inventory Inventory needed Less: Beginning inventoryC37 15 % =D36 . 60 % 37 C36 60 % | =D37 15 % C37+C38 -E36 60 % =F37 15 % -E37+E38 -F36 60 % 35800 38 - E37 15 % =D37+D38 39 -F37+F38 -F37 15 % =F39-F40 40 =D37 15 % -D39-D40 -E37 15 % 41 Required purchases - E39- E40 -С39-С40 42 43 Company's inventory purchases budgets for Oranges 44 First Quarter Second Quarter Third Quarter Fourth Quarter 45 Sales revenue 46 -C7 -C46 60 % D47 15 % =D7 -E7 =F7 Cost of goods sold (60 %) -D46 60 % -E47 15 % -E46 60 % 47 -F46 60 % 57800 Add: Ending inventory =F47 15 % - E47+E48 -E47 15 % -E49-E50 48 Inventory needed 49 -C47+C48 -D47+D48 -D47 15 % -D49-D50 =F47+F48 |=F47 15 % =F49-F50 Less: Beginning inventory C47 15 % Required purchases 50 51 -C49- C50 52