Use the Following Information to Prepare a Cash Budget for Knightsbridge

question 67

Essay

Use the following information to prepare a cash budget for Knightsbridge Corporation for the month of June 2018.
In May,30-day credit sales were $175,000;80% of this amount is estimated to be collectible in June.
June sales are estimated to be $425,000;cash sales are usually 25% of total sales.Only 10% of credit sales are collected in the month in which the sale is made.
Total fixed expenses are $60,000 per month,including $26,000 depreciation.Variable expenses are 55% of sales.All expenses requiring payment are paid in cash when incurred.
A $40,000 note payable must be paid on June 30.
As of May 31,the cash balance is $94,000.
Answer:
Difficulty: 3 Hard
Topic: Preparing the Master Budget: An Illustration
Learning Objecti: 23-05 Prepare the budgets and supporting schedules included in a master budget.
Bloom's: Apply
AACSB: Analytical Thinking
-Aron Company makes computer screens,Model 1 and Model 2.Aron anticipates selling the screens as follows:
The inventory on 1/1/18 is 2500 units of Model 1 and 3000 units of Model 2.Aron wants to have on hand 45% of the anticipated sales of the following month for each model.Prepare a production budget for the first 3 quarters of 2018 for both models.

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Definitions:

Price Change

An alteration in the cost of goods and services in the market, which can be due to various factors like inflation, supply and demand changes, or external economic conditions.

Normal Good

A type of good for which demand increases when income increases and falls when income decreases, assuming all other factors remain constant.

Park Visits

The act of visiting a park for recreational, leisure, or sports activities, reflecting an individual's preference or demand for outdoor spaces.

Substitution Effect

The economic principle describing how changes in relative prices can influence the choice between goods or services, holding the overall satisfaction level constant.