Question

Purchases Budget in Units and Dollars

Budgeted sales of Wirtz Music Shop for the first six months of 2017 are as follows:

Month	Unit Sales	Month	Unit Sales
January	155,000	April	240,000
February	185,000	May	205,000
March	225,000	June	265,000

Beginning inventory for 2017 is 35,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $5.

Prepare a purchases budget in units and dollars for each month, January through May.

WIRTZ MUSIC SHOP Purchases Budget January - May, 2017
	January	February	March	April	May
Purchase units:
Purchase dollars:

Cash Budget

Patrick's Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows:

Month	Sales Revenue	Month	Sales Revenue
January	$ 350,000	March	$ 250,000
February	300,000	April	200,000

All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 80 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $52,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $35,000.

Prepare monthly cash budgets for February, March, and April.

Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.

Patrick's Retail Company Cash Budgets February, March, and April
	February	March	April
Cash balance, beginning
Total Cash receipts
Cash available
Total disbursements
Cash balance, ending

Answer 1

			purchase budget
			Jan	Feb	March	April	May
purchase units			194,000	201,000	231,000	226,000	229,000
purchase dollars			970000	1005000	1155000	1130000	1145000
Working notes:
Expected sale units			155,000	185,000	225,000	240,000	205,000
add ending inventory			74000	90000	96000	82000	106000
total needs			229,000	275,000	321,000	322,000	311,000
less beginning inventory			35000	74000	90000	96000	82000
purchase required			194,000	201,000	231,000	226,000	229,000
Cash budget
				Feb	march	April
Cash balanace,beginning				35000	23,000	1,000
total cash receipts				320000	270000	220000
cash available				355000	293000	221000
total disbursement				332,000	292,000	252,000
cash balance,ending				23,000	1,000	-31,000
working notes:
cash receipts
Jan	350,000*40%			140000
Feb	300,000*60%;40%			180000	120000
march	250,000*60%;40%				150000	100,000
April	200,000*60%					120,000
total cash collection				320000	270000	220000
			jan	feb	march	april
cost of goods sold 80% of sales			280000	240000	200000	160000
cash disbursement				280,000	240,000	200,000
operating expense				52,000	52,000	52,000
total cash disbursement				332,000	292,000	252,000