Question

Kelly’s Kites began operations on 1/1/11. When preparing her budget for 2012, Kelly estimated in January that she would sell 5,000 kites to local beach shops, for $10 per kite. She estimated that sales would increase 5% each month from the prior month. All sales are made to the local beach shops on credit. Kelly estimates that 50% of the sales will be collected within the same month of the sale, 40% will be collected the following month, and 10% will be collected two months after the sale. Sales in November, 2011 were 3,500 kites, and in December 2011 were 4,000 kites.

a. Prepare the sales budget for the 1st quarter of 2012.
b. Prepare the cash receipts budget for the 1st quarter of 2012.

Answer 1

Total sales for the Quarter1 is $157,630

Total cash receipts for Quarter1 is $148,315

Step-by-step explanation:

SALES BUDGET

Jan Feb Mar Q1

Budgeted Sales units 5,000 5,250 5,513 15,763

Selling price per unit 10 10 10 10

Total Sales 50,000 52,500 55,130 1,57,630

EXPECTED CASH COLLECTIONS

Jan Feb Mar Q1

Nov month sales 3,500 3,500

Dec month sales 16000 4000 20000

Jan Month sales 25,000 20000 5000 50,000

Feb month sales 26250 21000 47,250

March month sales 27565 27,565

Total Cash Collections 44,500 50,250 53,565 1,48,315