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MBA 6315


A relatively new company, Wine To End Whining, Inc., has determined they need to engage in a budgeting process as part of their new strategic plan. The Company has asked you to provide the following items for the months of January, February, and March of 2017: A) a Purchases Budget; B) a Cash Budget; C) a Budgeted Income Statement; and D) a Budgeted Balance Sheet. They have provided you with the planning document below and also, with their December 31, 2016 Balance Sheet. Please complete the four items requested on Worksheet Tabs A, B, C, and D of this Workbook. Check Figures are provided for you on each Worksheet. Expected Sales in Dollars January 2017 $2,20,000 February 2017 $1,93,000 March 2017 $1,78,000 April 2017 $2,01,000 All Sales are on Credit Collections of Accounts Receivable Month of Service 44% Month following Service 56% Actual December 2016 Sales $2,00,000 Cost of Goods Sold is 65% of selling price. 65% Planned ending inventory as a percentage of next month's requirement. 60% Purchases are are all on credit. Purchases paid in current month 30% Purchases paid in next month 70% Actual Purchases made in December 2016 $1,37,800 Sales commission as a percent of sales 3% Sales commission are paid the month after they are incurred. Advertising expenses have a fixed and variable portion: Fixed portion $6,400 The fixed portion of the advertising is paid one month in advance. Variable portion as a percentage of sales 2% The variable portion is paid in the month incurred Insurance policy: Months of insurance coverage paid for 12 The policy period is from February 1 to January 31 each year The premium to be paid on February 1, 2017 is 24,000 $24,000 The premium will be charged to prepaid insurance Selling and Administrative expenses have a fixed and variable portion: Fixed portion $29,000 Variable portion as a percentage of sales 3% S&A expenses are paid in the month incurred Depreciation expense per month $4,000 The interest rate on the long term debt is 4% APR 4% Interest is incurred on the principal balance outstanding each month. Interest is paid on a quarterly basis. Interest for December to February will be paid March 1. No principal payments are scheduled to be made on the long-term debt until September of 2017 Income Tax rate 30% Accrued taxes are paid on the 15th of January, April, July and October The Company's Board of Directors plans to declare a dividend on February 20 $17,000 It will be paid on March 15.