Master Budget, Cash Budget and Budgeted Income Statement You…
Question Answered step-by-step Master Budget, Cash Budget and Budgeted Income Statement You… Master Budget, Cash Budget and Budgeted Income Statement You finally graduate and start a new job as a junior accountant at XYZ Inc. Your department is responsible for the nationwide distribution of men grooming sets. Because of the new fashion style and beard culture, the company has grown rapidly, and the prompt growth forces the management team to improve their capacity and efficiency. You have just been given responsibility for financial planning and budgeting for the west coast region. Today is your first day, you have been assigned to work with the controller and prepare the master budget and cash budget for the manager, who will present the budget and discuss the financial objectives during the management meeting tomorrow. The manager has left you some notes. Notes: The XYZ’s grooming kits are sold at $18 and they are flying off the shelves. The monthly sales forecasts are provided below: QuarterUnitQ1-22 20,000 Q2-22 24,000 Q3-22 68,000 Q4-22 35,000 Q1-23 45,000 Q2-23 55,000 The increased sales volume during June and December is due to Father’s Day and holidays with XYZ being one of the favorite gift options. The production manager demands 30% of the next Quarter’s sales units. XYZ currently does its assembly production in-house. Each unit consists of 2 grooming units and each unit costs $1.00. Each finished unit needs 0.20 labour hours to assemble. The hourly pay rate of the assembling workers is $15 per hour. The production manager also requires the desired ending direct materials inventory as the 40% of the next quarter’s direct material units of the production.Regarding the cash budget, his notes indicate that the company needs a minimum ending cash balance each month of $15,000. All direct material purchases are paid in the following manner: 50% in the quarter of the purchase and the remaining 50% in the next following quarter. All sales to the distributors are made on credit and are to be payable within 45 days. XYZ collects the 60% of Accounts Receivable by the end of each quarter and the rest 40% in the following quarter. XYZ has not experienced any bad debts as the credit terms are favorable. In third quarter 2022, XYZ is planning to purchase a piece of land, which costs $240,000. XYZ has set up a line of credit account with the local bank, which allows XYZ to borrow up to $50,000. XYZ can pay up its balance anytime without penalty and the unpaid balance be charged at 12% annual interest.Below is the cost estimation of the XYZ division quarterly manufacture overhead and selling and administrative expenses: Manufacture OverheadVariable: Indirect Materials $ 0.50 per labour hourIndirect Labour $ 0.20 per labour hourFixed: Wages and Salaries $ 2,000 Utilities $ 1,000 Insurance $ 1,000 Depreciation $ 1,500 Selling and General Administrative Expense Variable Sales Commission $2 per unit Freight $1 per unit Fixed: Wages and Salaries $ 22,000 Utilities $ 14,000 Insurance $ 1,200 Depreciation $ 1,500 Miscellaneous $ 3,000 Balance SheetCash $15,000Accounts Receivable $200,000Accounts Payable $85,000 Required: a) Prepare 2022 quarterly master budget and income statement b) Cash Budget Accounting Business Managerial Accounting ACCOUNTING 1860 Share QuestionEmailCopy link Comments (0)
