Question

[The following information applies to the questions displayed below.] Walton Company is a retail company that specializes in selling outdoor camping equipment. The company is considering opening a new store on October 1, year 1 . The company president formed a planning committee to prepare a master budget for the first three months of operation. As budget coordinator, you have been assigned the following tasks. Required a. October sales are estimated to be $390,000, of which 40 percent will be cash and 60 percent will be credit. The company expects sales to increase at the rate of 20 percent per month. Prepare a sales budget.

Answer 1

The sales budget for the Walton Company's new store involves calculating the cash and credit sales for October, then increasing these figures by 20% for November and December to account for the expected sales growth.

Step-by-step explanation:

The student is tasked with creating a sales budget for the Walton Company, which is planning to open a new store. To begin the budget, we need to calculate the sales for each month, considering that October sales are estimated to be $390,000 with a 40 percent cash sales mix and 60 percent credit sales mix, and sales are expected to increase by 20 percent per month.

For October, the sales mix would be $156,000 cash (40% of $390,000) and $234,000 credit (60% of $390,000). For November, simply increase each of these numbers by 20 percent, giving us $187,200 cash sales (20% increase from October's cash sales) and $280,800 credit sales (20% increase from October's credit sales). For December, another 20 percent increase would lead to cash sales of $224,640 and credit sales of $336,960.

Therefore, the sales budget for the first three months would be:

• October: $156,000 cash + $234,000 credit = $390,000 total sales
• November: $187,200 cash + $280,800 credit = $468,000 total sales
• December: $224,640 cash + $336,960 credit = $561,600 total sales