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 6 percent for peaches and 11 percent for oranges. The current year’s sales revenue data follow.

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
Peaches	$	239,000		$	259,000		$	319,000		$	259,000		$	1,076,000
Oranges		401,000			451,000			571,000			381,000			1,804,000
Total	$	640,000		$	710,000		$	890,000		$	640,000		$	2,880,000

Based on the company’s past experience, cost of goods sold is usually 70 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 $670,000, prepare the company’s budgeted annual income statement.

3. Ms. Jasper estimates next year’s ending inventory will be $35,100 for peaches and $56,800 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product

Required A.

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

	First Quarter Second Quarter Third Quarter Fourth Quarter Total Peaches Oranges Total

Required B

If the selling and administrative expenses are estimated to be $670,000, prepare the company’s budgeted annual income statement.

	JASPER FRUITS CORPORATION Budgeted Annual Income Statement

Required C1:

Ms. Jasper estimates next year’s ending inventory will be $35,100 for peaches. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product. (Round your final answers to nearest whole dollar.)

	First Quarter Second Quarter Third Quarter Fourth Quarter Inventory needed Required purchases

Required C2.

Ms. Jasper estimates next year’s ending inventory will be $56,800 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product. (Round your final answers to nearest whole dollar.)

	First Quarter Second Quarter Third Quarter Fourth Quarter Inventory needed Required purchases

Answer 1

Solution Required A. Company's sales budget for the next year for each quarter by individual product I Peaches (WN-1) Oranges (WN-1) Total First Quarter $253,340 $445,110 $698,450 Second Quarter Third Quarter $274,5401 $338,140 $500,610 $633,810 $775,150 $971,950 Fourth Quarter $274,540 $422,910 $697,450 Total $1,140,560 $2,002,440 $3,143,000 WN-1 Second Quarter Third Quarter Fourth Quarter Total $259,000 $319,000 $259,000 $1,076,000 | First Quarter Peaches (a) Current year's sales $239,000 revenue (b) Expected increase in next $14,340 year (a x 6%) (c) Budgeted sales for next $253,340 year (a + b) $15,540 $19,140 $15,540 $ 64,560 $274,5401 $338,140 $274,540 $1,140,560 $401,000 $451,000 $571,000 $381,000 $1,804,000 Oranges (a) Current year's sales revenue (b) Expected increase in next year (a x 11%) (c) Budgeted sales for next year (a + b) $44,110 $49,610 $62,810 $41,910 $198,440 $445,110 $500,610 $633,810 $422,910 $2,002,440 Required B. Company's budgeted annual income statement JASPER FRUITS CORPORATION Budgeted Annual Income Statement Sales revenue Cost of goods sold ($3,143,000 x 70%) Gross profit Selling and administrative expenses Net income $3,143,000 $2,200,100 $942,900 $670,000 $272,900

Required C1. Company's inventory purchases budgets for Peaches Sales revenue Cost of goods sold (70%) Add: Ending inventory Inventory needed Less: Beginning inventory Required purchases First Quarter Second Quarter $253,340 $274,540 $177,338 $192,178 $28,827 $35,505 $206,165 $227,683 $26,601 $28,827 $179,564 $198,856 Third Quarter Fourth Quarter $338,140 $274,540 $236,698 $192,178 $28,8271 $35,100 $265,5251 $227,278 $35,505 $28,827 $230,0201 $198,451 Required C2. Company's inventory purchases budgets for Oranges Sales revenue Cost of goods sold (70%) Add: Ending inventory Inventory needed Less: Beginning inventory Required purchases First Quarter Second Quarter Third Quarter $445,1101 $500,6101 $633,810 $311,5771 $350,427 $443,667 $52,564 $66,550 $44,406 $364,1411 $416,977 $488,073 $46,737 $52,564) $66,550 $317,405 $364,413 $421,523 Fourth Quarter $422,910 $296,037 $56,800 $352,837 $44,406 $308,431

To see the formulas, please see the below images:

C D E F G Solution Required A. Company's sales budget for the next year for each quarter by individual product Peaches (WN-1) Oranges (WN-1) Total First Quarter Second Quarter Third Quarter Fourth Quarter =C16 =D16 1=E16 =F16 =C21 =D21 -E21 =F21 =SUM(C6:07) |-SUM(D6:07) -SUM(E6:E7) -SUM(F6:F7) Total =SUM(C6:F6) SUM(C7:F7) -SUM(G6:G7) 10 WN-1 12 First Quarter Second Quarter Third Quarter Fourth Quarter Total 13 14 239000 259000 319000 259000 |-SUM(C14:F14) Peaches (a) Current year's sales revenue (b) Expected increase in next year (a x 6%) (c) Budgeted sales for next year (a+b) 15 =C14*6% =D14*6% -E14*6% 1=F14.696 -SUM(C15:F15) 1 =C14+C15 =D14+D15 =E14+E15 =F14+F15 =G14+G15 16 17 18 19 401000 4 51000 571000 381000 -SUM(C19:F19) Oranges (a) Current year's sales revenue (b) Expected increase in next year (a x 11%) (c) Budgeted sales for next year (a + b) 20 =C19*11% =D19 11% =E19 11% =F19 1196 =SUM(C20:F20) =C19+020 =D19+D20 1-E19+E20 =F19+F20 T-SUM(C21:F21) 21 22

23 Required B. Company's budgeted annual income statement 24 25 26 27 28 JASPER FRUITS CORPORATION Budgeted Annual Income Statement Sales revenue -G8 Cost of goods sold ($3,143,000 x 70%) =D27709 Gross profit =D27-028 Selling and administrative expenses 670000 Net income =D29-D30 29 30 31 32 33 34 Required C1. Company's inventory purchases budgets for Peaches 35 36 37 38 Sales revenue Cost of goods sold (70%) Add: Ending inventory Inventory needed Less: Beginning inventory Required purchases First Quarter Second Quarter Third Quarter Fourth Quarter =C6 =D6 -E6 =F6 =C36*70% |=D36*70% =E36 70% =F36 70% =D37*15% -E37*15% =F37*15% 35100 =C37+C38 =D37+D38 =E37+E38 =F37+F38 =C37 15% =D37*1596 E37*15% =F37 1596 =C39-040 =D39-D40 =E39-E40 =F39-F40 39 40 41 42 43 44 Required C2. Company's inventory purchases budgets for Oranges 46 57 -F7 48 Sales revenue Cost of goods sold (70%) Add: Ending inventory Inventory needed Less: Beginning inventory Required purchases First Quarter Second Quarter Third Quarter Fourth Quarter =07 =C46*70% 1=D46*70% 1=E46*70% =F46*70% =D4715% =E47*15% =F47*15% 56800 =C47+048 =D47+D48 =E47+E48 =F47+F48 =C47*15% =047*15% -E4715% =F47*15% -C49-C501 049-050 -E49-E50 -F49-F50 49 50 51