ACT202:Spring2020:GradedCase#5:MasterBudget

ACT202:Spring2020:GradedCase#5:MasterBudget:

forBaderAnbar:GivenInformation:TheBeautifulLampCompanymakesandsellswelldesignedendtablelamps.Managementisconfidentaboutitsforecastedsalesgrowthinlightofthepriceandhighqualitycraftsmanship.Belowistheinformationmanagementisusinginpreparingtheupcomingannualbudget.Sales:Salesinthefourthquarterprecedingthebudgetyearareexpectedtobe18,000unitsandsalesareexpectedtoincreaseby1,600unitsperquarterforthebudgetyear.Thesalespriceperlampisexpectedtobe$65.00inthefourthquarterprecedingthebudgetyearandisexpectedtoincreaseby$1.40perlampperquarterforthenextseveralquarters.Historyindicatesthat60%ofsalesarecashsalesandthebalances(40%)aresalesonaccountwhicharefullycollectedthefollowingquarter.TheAccountsReceivablebalanceattheendofthefourthquarterprecedingthebudgetyearisexpectedtobe$468,000.Inventory:Thecompanymaintainsafinishedgoodsinventoryequalto30%ofthefollowingquartersales.Thelampsareexpectedtocost$36.00eachinthe4thquarterprecedingthebudgetyearandcostsareexpectedtoriseby$1.00perlampperquarterbeginninginthefirstquarterofthebudgetyear.Fiftypercent(50%)oftheinventorypurchasesareexpectedtobepaidinthemonthpurchasedandthebalance(50%)isexpectedtobepaidinthefollowingquarter.TheAccountsPayablebalanceattheendofthefourthquarterprecedingthebudgetyearisexpectedtobe$332,640.OperatingExpenses:Thecompany'soperatingexpensesincludethefollowing.Rentfortheplantisexpectedtobe$240,000perquarter.Depreciationexpenseisexpectedtobe$8,000perquarter.Salariesandwagesareexpectedtobe$200,000inthefourthquarterprecedingthebudgetyearandareexpectedtoincreaseby2%perquarterforthebudgetyear.Miscellaneousexpensesinthefourthquarterprecedingthebudgetyearareexpectedtobe$28,000andareexpectedtoincreaseby5%perquarter.AllOperatingexpensesarepaidinthequarterinwhichtheyareincurred.Accountinginformation:CostofGoodsSold(foreachquarter)isdeterminedbytheestimatedaveragecostperunitpurchasedduringtheyeartimesthenumberofunitssoldduringeachquarter.ThebeginningCashbalanceforthebudgetedperiodisexpectedtobe$150,000.Preparethefivebudgets:Sales,Purchases,OperatingExpenses,IncomeStatement,andCash.