MBA642 Project 4



Data Scenario:

You have just been hired into a management position which
requires the application of your budgeting skills.

You find out that budgeting has not been a priority of the
company and that they have been experiencing cash shortages.

You have contacted various areas on the organization and
have accumulated the information below to assist you

in preparing a comprehensive budget.

Following is actual information relates to the operations of
a merchandiser named Sled Company, a
wholesaler of sleds as of March 31.

Cash $7,000

Accounts receivable 15,200

Inventory 22,960

Accounts Payable 22,000

Actual and Budgeted sales dollar Data-Sales Budget:

March (actual) $38,000

April $41,000

May $42,000

June $40,000

July $43,000

Sales are following type: 65% Cash sales collected in month of sale

35% Credit sales collected in the following
month of sale

Credit sales are collected in the month following sale. The accounts receivable at March 31 are a
result of March credit sales.

Cost of goods sold equals 80% of sales price

At the end of each month, inventory is to be on hand equal

70% of following month’s sales needs, stated
at cost.

Inventory purchases are paid 47% in month of purchase

53% in month after purchase

The accounts payable at March 31 are a result of March
purchases of inventory.

Monthly expenses are as follows and are paid in the month
incurred if it is a cash expense.

Salaries and wages 13% of sales dollar

Rent $2,500
per month

Other cash expenses 4% of sales dollar

Advertising $1,000
per month

Depreciation $900 for April only

Depreciation $1,000
per the months of May and June

Equipment purchased for cash

in May $2,000


1. Prepare a Cash Receipts Budget for the quarter ending
June 30th, by month and quarter. See page 362

You do not need a formal sales budget since the sales budget
is above in the data.

2. Prepare a
merchandise purchase budget by month and quarter. A merchandiser purchases in dollars.

I have set up a formatted budget for you. You can see how I have made a few minor
changes to Schedule 2 on page 356, which
is a production budget which we are not preparing.

Make sure you think about the numbers you use in the quarter

I am specifically talking about how you handle beginning and
ending inventory.

3. Prepare a Selling
and Administrative Expense Budget, by month and quarter. See page 361***

My budget is a little bit different than the one in the
text, because I used percentage of sales dollar.

4. Prepare a Cash
Disbursements Budget, by month and quarter. See
page 363***

5. Prepare a cash
budget showing the months and quarter.

Use the format I have provided on the budget sheet.

Do not worry about a minimum cash balance or financing
needs, since we are trying to develop a cash management plan.

6. Based on the
quarterly cash budget you prepared, do you have any recommendations

on cash management. Discuss the type of business and the
cash flow problems a company in this industry might have.

Type your answer on the budget worksheet , where I have set
out the question.

7. Prepare a budgeted
income statement for the quarter ending June 30, 20XX.

You do not need to
show monthly columns. I
entered Sales for you on the income statement

8. What do you think
about the survivability of this business?

9. What if the
company finds out the monthly rent will increase to $2,800, what budgets are
effected? Why?

What is the New Net income(Loss)?

If you have linked everything correctly, you should only
have to change the monthly rent

on this sheet to determine your answer to the questions
asked. Please change the rent back to
the original amount of 2,500 before you submit.


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