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Chapter 22: Q22E (page 1233)

Preparing an operating budget—sales budget
Yarbrough Company manufactures T-shirts printed with tourist destination logos. The following table shows sales prices and projected sales volume for the summer months:
Projected Sales in Units T-Shirt Sizes Sales Price June July August Youth $ 7 575 500 525 Adult—regular 17 625 900 825 Adult—oversized 18 400 500 475 Prepare a sales budget for Yarbrough Company for the three months.

Short Answer

Expert verified

Answer

The budgeted sales revenue for the June, July, and August are $21,850, $27,800, and $26,250.

Step by step solution

01

Meaning of sales budget

A sales budget estimates the amount of sales revenue.

02

Preparation of sales budget

	June	July	August
Youth	$4,025	$3,500	$3,675
Adult- regular	$10,625	$15,300	$14,025
Adult- oversized	$7,200	$9,000	$8,550
Total	$21,850	$27,800	$26,250

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Most popular questions from this chapter

Explain the difference between strategic and operational budgets

Question: Preparing a financial budget—schedule of cash receipts, schedule cash payments, cash budget

Baxter Company’s budget committee provides the following information: December 31, 2017, account balances:

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February 2018. Assume no financing took place.

Explain the difference between static and flexible budgets.

What is the formula used to determine the number of units to be produced?

Describing master budget components

Sarah Edwards, division manager for Pillows Plus, is speaking to the controller, Diana Rothman, about the budgeting process. Sarah states, “I’m not an accountant, so can you explain the three main parts of the master budget to me and tell me their purpose?” Answer Sarah’s question.

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