ACCT
505 Course Project 1 LBJ
Company
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COURSE PROJECT 1 INSTRUCTIONS
You have just been contracted as a
budget consultant by LBJ Company, a distributor of bracelets to various retail
outlets across the country. The company has done very little in the way of
budgeting and at certain times of the year has experienced a shortage of cash.
You have decided to prepare a cash
budget for the upcoming fourth quarter in order to show management the benefits
that can be gained from proper cash planning.You have worked with accounting
and other areas to gather the information assembled below.
The company sells many styles of
bracelets, but all are sold for the same $10 price. Actual sales of bracelets
for the last three months and budgeted sales for the next six months follow:
|
July (actual)
|
20,000
|
|
August (actual)
|
26,000
|
|
September (actual)
|
40,000
|
|
October (budget)
|
70,000
|
|
November (budget)
|
110,000
|
|
December (budget)
|
60,000
|
|
January (budget)
|
30,000
|
|
February (budget)
|
28,000
|
|
March (budget)
|
25,000
|
The concentration of sales in the
fourth quarteris due to the Christmas holiday. Sufficient inventory should be
on hand at the end of each month to supply 40% of the bracelets sold in the
following month.
Suppliers are paid $4 for each
bracelet. Fifty-percent of a month’s purchases is paid for in the month of
purchase; the other 50% is paid for in the following month. All sales are on
credit with no discounts. The company has found, however, that only 20% of a
month’s sales are collected in the month of sale. An additional 70% is
collected in the following month, and the remaining 10% is collected in the
second month following sale. Bad debts have been negligible.
Monthly operating expenses for the
company are given below:
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