ACTG2020_Week8 Ch9_2014

Ustify on an annual basis lo 1 budgeting example royal

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: xample Royal Company is preparing budgets for the quarter ending June 30. Budgeted sales for the next five months are: April 20,000 units May 50,000 units June 30,000 units July 25,000 units August 15,000 units. The selling price is $10 per unit. LO 2 The Sales Budget The individual months of April, May, and June are summed to obtain the total projected sales in units and dollars for the quarter ended June 30th. LO 2 Expected Cash Collections All sales are on account. All sales are on account. Royal’s collection pattern is: Royal’s collection pattern is: 70% collected in the month of sale, 70% collected in the month of sale, 70% 70% 25% collected in the month following sale, 25% collected in the month following sale, 25% 25% 5% uncollectible. 5% uncollectible. 5% 5% The March 31 accounts receivable balance of The March 31 accounts receivable balance of The The $30,000 will be collected in full. $30,000 will be collected in full. $30,000 $30,000 LO 2 Expected Cash Collections LO 2 Expected Cash Collections From the Sales Budget for April. LO 2 Expected Cash Collections From the Sales Budget for May. ? Expected Cash Collections LO 2 The Production Budget Sales Sales Budget Budget and ted e pl Expected om C Cash Collections Production Budget Production must be adequate to meet budgeted sales and provide for sufficient ending inventory. LO 2 The Production Budget The management at Royal Company wants ending inventory to be equal to 20% of the following month’s budgeted sales in units. On March 31, 4,000 units were on hand. Let’s prepare the production budget. LO 2 The Production Budget LO 2 The Production Budget ? March 31 ending inventory Budgeted May sales Desired ending inventory % Desired ending inventory 50,000 20% 10,000 LO 2 The Production Budget LO 2 The Production Budget Assumed ending inventory. LO 2 The Direct Materials Budget Production Production Budgetd Budget om C e et pl Direct Materials Budget The direct materials budget details the raw materials The that must be purchased to fulfill the production budget and to provide for adequate inventories. budget LO 2 The Direct Materials Budget At Royal Company, five pounds of material...
View Full Document

This note was uploaded on 03/28/2014 for the course ACTG 2020 taught by Professor Lizfarrel during the Spring '11 term at York University.

Ask a homework question - tutors are online