Question

MPQ Corporation is in the process of assembling its budget for the quarter ending March 31. Please see the following sales data:

• Sales Price = $28 per unit
• January Sales In Units = 1,650
• February Sales In Units = 1,400
• March Sales In Units = 1,550
• Budgeted sales are 30% cash and 70% credit

Accounts Receivable, December 31 is $14,000. The $14,000 represents the uncollected portion of December sales.

The company prefers inventory equal to 27% of the net month’s sales in units. The December 31 balance of inventory is 480 units. The cost of inventory is $12 per unit. 35% of the purchases are paid in the month of purchase and 57% are paid in the subsequent month. At December 31, the Accounts Payable balance is $6,800. The $6,800 represents the purchases unpaid in December.

Miscellaneous Expenses are paid within the month incurred. These expenses consist of the following:

• Freight - 3% of Sales
• Sales Commissions - 8% of Sales
• Lease on Factory - $3,750
• Salaries (Office) - $2,200 per month

Please review the additional data below:

• Depreciation Expense = $3,850 per month
• Income Tax Rate = 38% (Income Taxes are paid on 4/1/2019 and 12/31/2019)
• The company desires to keep a minimal $10,000 cash balance
• Cash Balance, December 31 is $9,800
• If there is a cash shortage, a loan is taken out to compensate at the end of the month. The interest on the loan is .8% per month, calculated from the beginning of the month balance on the loan. The interest must be paid each month. Please round to the nearest whole dollar.
• There is more cash than the minimum required, the additional amount is applied to paying down the debt.
• At December 31 there is not a balance on the loan.

Instructions

Prepare a master budget for each of the first three months during the calendar fiscal year. The master budget will include the following:

1. Schedule of Cash Disbursements for Merchandise Purchases

Answer 1

Sales Budget
	Budgeted Unit Sales	Budgeted Unit Price	Budgeted Total Dollars
January	1,650	$28.00	46,200
February	1,400	28	39,200
March	1,550	28	43,400
Totals for the quarter	4600	28	128,800
Production budget.
Production Budget
	Jan	Feb	Mar	Total
Net month's budgeted sales (units)	1,650	1,400	1,550
Ratio of inventory to same month sales	27%	27%	27%
Budgeted ending inventory (units)	446	378	419	419
Budgeted units sales for month	1,650	1,400	1,550	4,600
Required units of available production	2,096	1,778	1,969	5,019
Beginning inventory (units)	480	446	378	480
Units to be produced	1,616	1,333	1,591	4,539
Material price per unit	$12	$12	$12	$12
Total cost of direct material purchases	$19,386	$15,990	$19,086	$54,462
Schedule Cash Selling & Administartive Expense Budget
	Jan	Feb	Mar	Total
Budgeted sales	$46,200	$39,200	$43,400
Sales commission percent	8%	8%	8%
Sales commissions	$3,696	$3,136	$3,472	10304
Freight 3%	$1,386	$1,176	$1,302	$3,864
Lease on Factory	$3,750	$3,750	$3,750	11250
Office salaries	2,200	2200	2200	6600
Cash selling and administrative expenses	$11,032	$10,262	$10,724	$32,018
Cash budget.
Calculation of Cash receipts from customers:
		Jan	Feb	Mar	Total
Total budgeted sales		$46,200	$39,200	$43,400
Cash sales	30%	13,860	11,760	13,020	38,640
Sales on credit	70%	$32,340	$27,440	$30,380
Total cash receipts from customers
		Jan	Feb	Mar	Total
Current month's cash sales		$13,860	$11,760	$13,020	38,640
Collections of receivables		14,000	32,340	27,440	73,780
Total cash receipts		27860	44100	40460	112,420
Cash disbursement of Mercandise Purchase
For Accounts payable		6800			6,800
For Jan purcahses (35% in same month and 57% in next month)		$6,785	$11,050		$17,835
For Feb purchases			$5,597	$9,114	$14,711
For Mar purchases				$6,680	$6,680
Total cash payment of purchases		13585	16647	15794	46026
Note 35% plus 57%=92% payment is made as per the information given
Cash Budget
	Jan	Feb	Mar	Total
Beginning cash balance	$9,800	$13,043	$30,234	$9,800
Cash receipts from customers	27,860	44,100	40,460	112,420
Total cash available	37660	57143	70694.38	$122,220
Cash disbursements:
Payments for raw materials	13,585	16,647	15,794	46,026
Cash selling and administrative expenses	11,032	10,262	10,724	32,018
Total cash disbursements	24617	26909	26518	78,044
Preliminary cash balance	13,043	30,234	44,176	44,176
Additional loan (loan repayment)	0		0
Ending cash balance	$13,043	$30,234	$44,176	$44,176
Budgeted Income Statement
For Three Months Ended June 30, 2015
Sales		128,800
Less:Cost of good sold		55200
(4600*12)
Gross profit		73,600
Less
Selling & administrative expenses	32018
Depreciation expenses	11550
Total selling & administrative expenses		43568
Net Operating Income		30,032
Less: Income tax expenses		11412
Net Income		18,620
If any doubt please comment