Question

You will use the information to prepare elements of the ABC Company Budget for the 4^th quarter (October, November, and December) of 2018.

The following balances were taken from the ABC Company’s balance sheet on September 30, 2018:

Cash                                      25,000

Accounts Receivable       90,000

Inventory                            30,000

Accounts Payable             54,000

The following information is also available and pertaining to ABC Company:

ABC sells one product that is priced at $10/unit. Sales for the months of October and November are expected to be 10,000 units, sales for December are expected to be 12,000 units, and sales for January are expected to be 9,000 units.

The company possessed 5,000 units of inventory as of September 30, 2018. They are required to have 50% of the following month’s projected sales available as an ending inventory. They purchase their inventory for $6/unit.

ABC pays their sales representatives a commission of 7.5% of sales. They pay their sales supervisors $3,000 per month. All salaries are paid in cash in the same month.

ABC’s cash-based general and administrative expenses are $4,000 per month, and are all paid in cash in the same month. ABC has a depreciation expense of $250/month.

All sales are on credit, and all accounts receivable are collected in full during the month following the sale.

All purchases of inventory are on credit, and all accounts payable are paid in full during the month following the purchase.

The minimum cash balance that ABC’s corporate policy requires is $10,000. If the monthly ending balance is below that amount, ABC must initiate a borrowing that requires a 1% monthly interest payment. As of September 30, there is no active borrowing. Excess cash balances above the minimum are to be used to repay active borrowings, if applicable.

Prepare the Sales Budget for the 4^th quarter of 2018.

Answer 1

Answer

• All working forms part of the answer
• You have ONLY asked for the SALES BUDGET
• Requirement asked:

	Sales Budget : Quarter 4
Working		October	November	December	Total Quarter 4
A	Budgeted units to be sold	10,000	10,000	12,000	32,000
B	Sale Price per unit	$                    10.00	$                   10.00	$                   10.00	$                   10.00
C = A x B	Budgeted Sales Revenue	$          100,000.00	$        100,000.00	$        120,000.00	$        320,000.00