The variable selling and administrative expenses are

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The variable selling and administrative expenses are $0.50 per unit sold. Fixed selling and administrative expenses are $70,000 per month. The fixed selling and administrative expenses include $10,000 in costs – primarily depreciation – that are not cash outflows of the current month. Let’s prepare the company’s selling and administrative expense budget.
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8-48 Selling and Administrative Expense  Budget Calculate the selling and administrative cash expenses for the quarter.
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8-49 Selling Administrative Expense  Budget
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8-50 Format of the Cash Budget The cash budget is divided into four sections: 1. Cash receipts section lists all cash inflows excluding cash received from financing; 2. Cash disbursements section consists of all cash payments excluding repayments of principal and interest; 3. Cash excess or deficiency section determines if the company will need to borrow money or if it will be able to repay funds previously borrowed; and 4. Financing section details the borrowings and repayments projected to take place during the budget period.
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8-51 The Cash Budget Assume the following information for Royal: Ø Maintains a 16% open line of credit for $75,000 Ø Maintains a minimum cash balance of $30,000 Ø Borrows on the first day of the month and repays loans on the last day of the month Ø Pays a cash dividend of $49,000 in April Ø Purchases $143,700 of equipment in May and $48,300 in June (both purchases paid in cash) Ø Has an April 1 cash balance of $40,000
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8-52 The Cash Budget Schedule of Expected Cash Collections.
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8-53 The Cash Budget Direct Labor Budget. Manufacturing Overhead Budget. Selling and Administrative Expense Budget. Schedule of Expected Cash Disbursements.
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8-54 The Cash Budget Because Royal maintains a cash balance of $30,000, the company must borrow $50,000 on its line-of-credit.
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8-55 The Cash Budget Ending cash balance for April is the beginning May balance. Because Royal maintains a cash balance of $30,000, the company must borrow $50,000 on its line-of-credit.
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8-56 The Cash Budget $50,000 × 16% × 3/12 = $2,000 Borrowings on April 1 and repayment on June 30.
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8-57 The Budgeted Income Statement Cash Budget Budgeted Income Statement Completed With interest expense from the cash budget,  Royal can prepare the budgeted income  statement. 
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8-58 The Budgeted Income Statement Royal Company Budgeted Income Statement For the Three Months Ended June 30 Sales (100,000 units @ $10) 1,000,000 $ Cost of goods sold (100,000 @ $4.99) 499,000 Gross margin 501,000 Selling and administrative expenses 260,000 Operating income 241,000 Interest expense 2,000 Net income 239,000 $ Sales Budget. Ending Finished Goods Inventory. Selling and Administrative Expense Budget. Cash Budget.
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8-59 The Budgeted Balance Sheet Royal reported the following account balances prior to preparing its budgeted financial statements: Land - $50,000 Common stock - $200,000 Retained earnings - $146,150 (April 1) Equipment - $175,000
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8-60 Royal Company Budgeted Balance Sheet June 30 Assets: Cash 43,000 $ Accounts receivable 75,000 Raw materials inventory 4,600 Finished goods inventory 24,950 Land 50,000 Equipment 367,000 Total assets 564,550 Liabilities and Stockholders' Equity
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