70.2K

Verified Solution

Link Copied!

Hello, I would like to get a detailed working procedure for the question please. Thank you

Selected information concerning sales, purchases, inventories, selling and administrative expenses for Mutiara Bhd for the second quarter of 2010 are summarized as follows:

a) The sale for April is estimated for 10,000 units. The sales for the following months are expected to increase by 20% from the previous month. The selling price is RM15.00 per unit.

b) The sales for February and March were 6,000 and 8,000 units respectively.

c) Only 60% of the total sales are made in cash. Based on previous experience, about 50% of the credit sales are collected in the month after the sales and the balance is collected in the second month after the sales.

d) The company requires the ending inventory to be kept at minimum equals to 40% of the cost of goods sold of the following month. The cost of goods sold averages 55% of the sales.

e) The company obtains its merchandises directly from manufacturers. 60% of the purchases are paid in cash, another 20% are paid in the following month, and the balance is paid in the second month after the purchases.

f) The companys operating expenses are as follows. Assume that these expenses are paid in the month they were incurred:

- Building rent, RM2,500 per month

- Insurance premiums, RM500 per month

- Depreciation for equipment, RM700 per month

- Total employees salaries, RM25,000 per month

- Sale commissions at a rate of 5% of the monthly sales

- Other expenses estimated at 2% of the monthly sales

g) The companys policy requires a minimal monthly ending cash balance of RM15,000. The expected ending balance of cash on March 31 is RM18,900. Any deficiency of cash will be overcome by applying for a bank loan at an interest rate of 1% per month (based on remaining balance). The amount of loan and its repayment are assumed to be in multiples of RM1,000.

h) The company plans to buy a used lorry at a cost of RM27,000 in April. Some of the equipment will be sold at a price of RM5,000 in May.

Required

You are required to prepare the following budgets for the second quarter of 2010:

1. Sales budget (RM546,000)

2. Schedule of cash collections from customers (RM489,600)

3. Purchases, ending inventory and cost of goods sold budgets (RM324,324)

4. Schedule of cash payments for merchandise purchases (RM291,878)

5. Selling and administrative expenses budget (RM124,320)

6. Income statement budget (RM121,380)

7. Cash budget (RM72,312)

Answer & Explanation Solved by verified expert

See Answer