Built-Tight is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for product costs for the quarter follow. July August September Budgeted sales $ 55,000 $ 71,000 $ 57,000 Budgeted cash payments for Direct materials 15,360 12,640 12,960 Direct labor 3,240 2,560 2,640 Factory overhead 19,400 16,000 16,400 Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $44,200 in accounts receivable; and a $4,200 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,200 per month), and rent ($5,700 per month). BUILT-TIGHT Cash Budget For July, August, and September July August September Beginning cash balance Total cash available Cash payments for: Total cash payments Preliminary cash balance Additional loan from bank Repayment of loan to bank Ending cash balance Loan balance July August September Loan balance - Beginning of month Additional loan (loan repayment) Loan balance - End of month
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Built-Tight is preparing its
| July | August | September | |||||||
| Budgeted sales | $ | 55,000 | $ | 71,000 | $ | 57,000 | |||
| Budgeted cash payments for | |||||||||
| Direct materials | 15,360 | 12,640 | 12,960 | ||||||
| Direct labor | 3,240 | 2,560 | 2,640 | ||||||
| Factory overhead | 19,400 | 16,000 | 16,400 | ||||||
Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of $15,000 in cash; $44,200 in accounts receivable; and a $4,200 balance in loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries ($3,200 per month), and rent ($5,700 per month).
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