Budgeting practice

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FACPyA-UANL
International Business
Managerial Accounting

Budgeting practice

The company LNI, Inc. needs to prepare the budgets for the next four months. The current month is March 2010, andthe total of sales reported in the month was $40,000.

The policies of the company are the following:

• The sales are made 60% in cash and 40% on account.
• All credit accounts arecollected the next month of the sale.
• They sell one type of product and the price is $80.
• The cost of goods sold represents the 70% of the respective sales.
• At the end of every month,the company expects to keep an inventory of $20,000 plus the 80% of the cost of goods sold expected for the next month.
• Accounts payable to suppliers are required to be paid within 30 days.• The supplier requires the 50% of the purchase to be paid in the current month.
• Salaries to employees are divided into Fixed salaries of $2,500 per month, and commissions, which are the 15%of the sales, for all months.

Other monthly expenses:

- The administrative expenses are the 5% of the sales, and are paid in cash.
- The company pays $2,000 of rent.
- The cost ofthe insurance is $200.
- The depreciation expense (including new equipment) is $500.

Other information:

-The sales in units for the next four months will be:
April 625
May 1,000June 750
July 625

- LNI will buy new equipment for the offices in April for $3,000.
- The company will require a loan in April for $14,000.
- They plan to pay the loan asfollows: In May $1,000, in June $10,000 and in July $3,000.
- The interest they will be required to pay are $10 in May, $150 in June and $60 in July.
- LNI wants to keep cash for $10,000 at the endof every month.

Required

Prepare:
- Sales budget
- Collection of sales budget
- Purchases budget
- Purchases payments budget
- Salaries budget
- Salaries payments...
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