Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow: Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income First Quarter Second Quarter Third Quarter Fourth Quarter $ 174,000 $ 214,000 $ 264,000 87,000 87,000 17,400 107,000 107,000 132,000 132,000 26,400 21,400 $ 69,600 $ 85,600 $ 105,600 Historically, cost of goods sold is about 50 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 10 percent for each respective quarter above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 5 percent. Required a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate. Complete this question by entering your answers in the tabs below. $ 204,000 102,000 102,000 Required A Required B Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. Fourth Quarter First Quarter $ 20,400 $ 81,600 0 0 $ Second Quarter 0 0 Third Quarter $ 0 0 $ 0 Total $ 856,000 428,000 428,000 85,600 $ 342,400 $ 0 $ Total 0 0 0 0
Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for the last four quarters follow: Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income First Quarter Second Quarter Third Quarter Fourth Quarter $ 174,000 $ 214,000 $ 264,000 87,000 87,000 17,400 107,000 107,000 132,000 132,000 26,400 21,400 $ 69,600 $ 85,600 $ 105,600 Historically, cost of goods sold is about 50 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales revenue. Sales revenue Cost of goods sold Gross profit Selling & administrative expenses Net income Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 10 percent for each respective quarter above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 5 percent. Required a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate. Complete this question by entering your answers in the tabs below. $ 204,000 102,000 102,000 Required A Required B Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate. Fourth Quarter First Quarter $ 20,400 $ 81,600 0 0 $ Second Quarter 0 0 Third Quarter $ 0 0 $ 0 Total $ 856,000 428,000 428,000 85,600 $ 342,400 $ 0 $ Total 0 0 0 0
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 10CE: Coral Seas Jewelry Company makes and sells costume jewelry. For the coming year, Coral Seas expects...
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Concept explainers
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.
Question
Transcribed Image Text:Jacob Long, the controller of Arvada Corporation, is trying to prepare a sales budget for the coming year. The income statements for
the last four quarters follow:
Sales revenue
Cost of goods sold
Gross profit
Selling & administrative expenses
Net income
First Quarter Second Quarter Third Quarter Fourth Quarter
$ 174,000
$ 264,000
87,000
132,000
87,000
132,000
$ 214,000
107,000
107,000
21,400
17,400
26,400
$ 69,600
$ 85,600
$ 105,600
Historically, cost of goods sold is about 50 percent of sales revenue. Selling and administrative expenses are about 10 percent of sales
revenue.
Fred Arvada, the chief executive officer, told Mr. Long that he expected sales next year to be 10 percent for each respective quarter
above last year's level. However, Rita Banks, the vice president of sales, told Mr. Long that she believed sales growth would be only 5
percent.
Required
a. Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate.
b. Prepare a pro forma income statement including quarterly budgets for the coming year using Ms. Banks' estimate.
Complete this question by entering your answers in the tabs below.
Sales revenue
Cost of goods sold
Required A Required B
Prepare a pro forma income statement including quarterly budgets for the coming year using Mr. Arvada's estimate.
Fourth
Second
Quarter
Quarter
Gross profit
Selling & administrative expenses
Net income
First Quarter
$
$ 204,000
102,000
102,000
20,400
$ 81,600
0
0 $
Required A
0
0 $
Third Quarter
0
0 $
Required B >
0
Total
$ 856,000
428,000
428,000
85,600
$ 342,400
$
0 $
Total
0
0
0
0
0
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