K. Harned Course Project A, Statistics Problem Example

Sales Budget

Given: The sales budget for April May and June, the selling price per unit

In order to reach the total sales volume in dollars, the selling price must be multiplied by the number of units which are budgeted for each month. In the case of April, the budgeted sales volume of pairs of earrings is 65,000. This number is multiplied by the selling price which is $10.00. The total sales volume for the month of April is $650,000. The May budgeted sales volume of earrings is established at $1,000,000. In order to reach the dollar sales volume for the month of May we will multiply the budgeted amount of earrings for May and multiply by the selling price. This gives 100000 pairs of earrings multiplied by $10. The total sales volume for the month of May is $1,000,000. The June sales budget is 50,000 earrings. In order to reach the dollar sales volume of the month of June we will multiply the budgeted number of earrings by the selling price. This is demonstrated as 50,000 multi0plied by the selling price of $10 which equals $500,000. In order to derive the quarterly sales we will add the total sales volume from April, May and June. This yields $2,150,000

Schedule of Expected Cash Collections

1. Ten percent of February’s sales are collected in April. This amount equals $26,000.
2. Seventy percent of March sales are collected in April which is 0.7 x 400,000. This amount equals $280,000.
3. Twenty percent of April sales are collected in April. This infers that 0.2 x $650,000 which is equal to $130000.
4. Ten percent of March sales are collected in May. This is demonstrated as 0.1 x $400000 which equals $40,000.
5. Seventy percent of April sales are collected in May. This is demonstrated as 0.7 x $650,000 which equals $455,000.
6. Twenty percent of May sales are collected in May. This is demonstrated as $1000000 x 0.2 = $200000.
7. Ten percent of April sales are collected in June. This is demonstrated as 0.1 x $650000 which equals $65,000.
8. Seventy Percent of May sales are collected in June. This is demonstrated as 0.7 x $1,000,000 which equals $700,000.

Merchandise Purchasing Budget

The merchandise purchasing budget demonstrated the purchase price of the earrings at $4 per pair. The cost of purchases is 62,000 units multiplied by $4 for the month of April which equals $248,000. May’s cost purchase is 90,000 x $4 which equals $360,000. The June cost merchandise purchases are 46,000 x $4 per pair of earrings which equals $184,000.

Twenty percent of the inventory must be reserved on any budgeted month toward future inventory. The beginning inventory for April is 13,000 units. This amount is twenty percent of the 65,000 units which are budgeted for April. The ending inventory for April is 20,000 units. Twenty thousand units are twenty percent of the budgeted needs for May. The ending inventory for May is 10,000 units. This amount is twenty percent of the budgeted amount for June. The ending inventory for June is 6000 units. This amount is twenty percent of the budgeted amount for the month of July. The beginning inventory at the end of the quarter is 23,000 units. This amount is derived by reviewing the total quarterly needs and subtracting the quarterly required purchases.

Accounts Payable

The accounts payable for the liabilities and stockholder’s equity is $100,000. The accounts payable for each month in expenses is $345,000. This includes the advertising expense, rent, salaries, utilities and depreciation. The insurance is paid annually in November. The commissions are 4% and vary in accordance with the sales budget. The commission for the month of April are $650,000 x 0.04 = $ 26,000. The commission for the month of May are $1,000,000 x 0.04% = $40,000. The commissions for the month of June are $5000,00 x 0.04% = $20,000.

The accounts payable for April are $100,000 (liabilities and stockholder’s equities) plus sales commissions of $26,000 in addition to $345,000 in fixed expenses. The accounts payable for April is $471,000. May accounts payable is $40,000 in sales commissions plus $345,000 in fixed expenses which equals $ 385,000. The accounts payable for the month of June is $20,000 in commissions plus $345,000 in fixed expenses which equals $365,000. In order to derive the total accounts payable for the quarter, we will add April ($471,000) + May ($385,000) + June ($365,000) which equals $1,221,000.

Twenty percent of the sales must be available for the April purchases $650,000 x 0.2 = $ 130,000. Twenty percent of the sales must be available for the May purchases $1,000,000 x 0.2 = $ 200,000. Twenty percent of the sales must be available for the June purchases $500,000 x 0.2 = $ 100,000.

Cash Budget

There must be a balance of $50,000 each month. April collection equal twenty percent for the month of April which equals $130,000, ten percent from the month of February which equals $26,000, seventy percent of the March sales which equals $196,000. The totals add up to 4352,000 + 450,000. (Remember $50,000 must be maintained as a balance).

May collections equal twenty percent from May collections which equals $200,000, seventy percent from the April collections which equals $455,000 and ten percent from the March collections which equals $28,000. This adds up to $683,000 + $50,000= $733,000 (Remember $50,000 must be maintained as a balance). June collection equals twenty percent from June which is $100,000, seventy percent from May which is $700,000 and ten percent from April which $65,000. This adds up to $865,000 + $ 50,000= $915,000 (Remember $50,000 must be maintained as a balance).

The merchandise purchases were carr4ied from the merchandise purchase budget and entered on the merchandise purchase for April, May, June and quarterly, respectively. The fixed costs are $345,000 for advertising, rent, salaries and utilities. An equipment purchase of $15,000 was made in May and another purchase for $40,000 had been made in June. The equipment purchases total to $56,000. The deficiency in the receipts for April was $203,000. Considering that a $50,000 balance must be maintained, $253,000 had been borrowed in April. There was a deficit of $13,000 for May. Consequently, $63,000 was borrowed in May. An additional $25,160 was borrowed in June in order to make the loan and the interest payment. As of June 30, the $25, 160 had not accrued interest. The interest is calculated as 1% monthly of the outstanding balance.

Income Statement

The income statement carried the total revenue from the sales budget. The variable expenses are the cost of the purchase of the earrings which is $4 per pair and the 4% sales commission. All of the expenses were multiplied by a factor of three with the exception of insurance, which is paid in November. The contribution margin which had been calculated is $1, 204,000. The operating income is $151,000 from which the interest expense of $3160 is subtracted. This leaves a net income of $147, 840.

Balance Sheet

The cash on hand is $50,000. Accounts receivable is $800,000 (70% of May sales of $1,000,000 plus twenty percent of June sales of $500,000 which is $100,000). The inventory is 23,000 units at a cost of $4 per pair of earrings. The prepaid insurance is $3000 multiplied by three months which is $9000. The property and equipment is $42,000 in depreciation expense and $56,000 in new equipment which totals $98,000. The total assets are $1, 049,000.

Liability and Stockholder’s Equity

Account payable is $100,000 (given). Dividends payable is $15,000 (given) capital stock is $800,000 (given).The retained earnings is $712, 840. Accounts Receivable is $800,000 (70% of May sales of $1,000,000 pilus twenty percent of June sales of $500,000 which is $100,000).

Retained Earnings at June 30

The opening balance $50,000 (given). Net income $147,840 (earnings statement) total income $727, 840. This is considering dividends which are declared of $15,000 (given). Balance as of June 30 is $712, 840