(b) The budgeting section of-the corporate finance department of Atlas Products Company has received the following sales estimates from the marketing department: Total Sales Credit Sales December 2019 January 2020 February 2020 March 2020 Sh. 825,000 730,000 840,000 Sh.770,000 690,000 780,000 855,000 920,000 The company has found that, on average, about 25 percent of its credit sales are collected during the month when the sale is made, and the remaining 75 percent of credit sales are collected during the month following the sale. As a result, the company uses these figures for budgeting. The company estimates its purchases at 60 percent of next month's sales, and payments for those purchases are budgeted to lag the purchases by one month. Various disbursements have been estimated as follows: Wages and salaries Rent January Sh.250,000 February Sh.260,000 27,000 March Sh.290,000 27,000 27,000 10,000 Other expenses 12,000 14,000
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.
The company has found that, on average, about 25 percent of its credit sales are collected during
the month when the sale is made, and the remaining 75 percent of credit sales are collected
during the month following the sale. As a result, the company uses these figures for budgeting.
The company estimates its purchases at 60 percent of next month's sales, and payments for those
purchases are budgeted to lag the purchases by one month.
In addition, a tax payment of Sh.105,000 is due on January 15, and Sh.40,000 in dividends will
be declared in January and paid in March. Also, the company has ordered a Sh.75,000 piece of
equipment. Delivery is scheduled for early January, and payment will be due in February.
The company’s projected cash balance at the beginning of January is Sh.100,000, and the
company desires to maintain a balance of Sh.100,000 at the end of each month.
Prepare a
following information.
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