Chap 14 Outline

# Total estimated cash receipts preparing an inventory

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Total estimated cash receipts Preparing an inventory purchases budget & cash payment schedule Exercise 14-7 Naftel Company sells lamps and light fixtures. The purchasing department manager prepares the following inventory purchases budget. The goal is to maintain an ending inventory budget equal to 10% of the following months COGS. April is budgeted to have COGS of \$75,000 January February March 14-2

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Chapter 14 - Planning for Profit and Cost Control Budgeted COGS 50,000 54,000 60,000 Plus desired ending inventory 5,400 60,000*.1 = 6,000 7,500 Inventory needed 55,400 60,000 67,500 Less Beginning inventory 5,000 5,400 6,000 Required purchases 50,400 55,600 61,500 Preparing the cash payments schedule for inventory purchases: Assume from above that 80% of purchases are made in the month of purchase and 20% are made the following month. Figure out February cash payments 55,600*.80 + 50,400*.20 = 54,560 cash payments in february Preparing a selling and administrative budget These are the facts that we currently know. Sales for January are estimated at \$400,000 Salary Expense (Fixed) \$24,000 Sales Commissions 5% of Sales Supplies Expense 2% of Sales Utilities (Fixed) \$ 1,400 Depreciation on Center Equipment (Fixed)* \$ 750 Rent (Fixed) \$ 3,600 Miscellaneous (Fixed) \$ 900 24,000 + (.05*400,000) + (.02*400,000) + 1,400 + 750 + 3,600 + 900 = 58,650 Preparing a cash budget Cash budget has 3 main sections: 1. Cash receipts 2. Cash payments (disbursements) 3. Financing section (Do I need to borrow money!) Exercise 14-13 14-3
Chapter 14 - Planning for Profit and Cost Control The accountant for Teresa's Dress Shop prepared the following cash budget. Teresa's desires to maintain a cash cushion of \$14,000 at the end of each month. Funds are as-
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• Fall '12
• Cohen
• Cash Budget, budgeting process, cash Budget Cash

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