Accounting Preparing Sales And Purchase Budget Homework Help
- July 27, 2017
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- Category: Accounting QA
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Blissful Bubbles imports and sells bottles of flavoured mineral water. Blissful Bubbles has forecast the following sales of bottled mineral water for January – March 2016.
Jan 50,000; Feb 40,000; Mar 30,000 (and it is assumed sales will remain at this level until September 2016).
Actual sales for November and December 2015 were 50,000 and 60,000 bottles respectively.
The average selling price for a bottle of mineral water is $4 and the cost to buy and import them is $1.50. Purchases are paid for in the month following purchase. Sales are 70% cash (to retail customers) and 30% credit (to supermarkets). Credit customers pay 50% in the month following the sales and 50% in the month following that.
Blissful Bubbles has a policy of maintaining a closing stock of bottled water equal to 20% of the following month’s sales (in units).
Required
1. Prepare the sales budget for the quarter January – March 2016 (showing each month and the total for the quarter) and include a schedule of expected cash collections.
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2. Prepare the purchases budget for Blissful Bubbles .
3. Why do you think a business plans for an ending inventory level?
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