Asked by Abbee Darsey on May 19, 2024
Verified
Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected:40% in the month of the sale60% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs.The budgeted sales for August is closest to:
A) $956,800
B) $1,039,600
C) $993,600
D) $828,000
Master Budget
A comprehensive financial plan for an organization that includes all of its revenue and expense accounts, combining them into a consolidated budget.
Budgeted Sales
Projected sales figures for a given period, often used for planning and forecasting purposes within a business.
Credit Sales
Transactions where the payment for the goods or services sold is to be made at a later date.
- Comprehend the elements and framework of master budgets.
Verified Answer
Total sales for August:
August credit sales = $800,000
September collections = $480,000 (60% of $800,000)
Total August sales = $1,280,000
Total sales for September:
September credit sales = $960,000
October collections = $576,000 (60% of $960,000)
Total September sales = $1,536,000
To determine the budgeted sales for August, we can take the average of the two months:
($1,280,000 + $1,536,000) / 2 = $1,408,000 / 2 = $704,000
Therefore, the budgeted sales for August is closest to $1,039,600 (choice B).
Learning Objectives
- Comprehend the elements and framework of master budgets.
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