TriStar Inc.
TriStar Inc., a merchandising business, wants a master budget prepared, beginning
January 1, 20XX. The managers of the different departments have provided the
following information:
The Sales Manager has projected the following sales:
o 1st Quarter
9,760 units
o 2nd Quarter 10,520 units
o 3rd Quarter 11,040 units
o 4th Quarter
8,680 units
o Projected selling price is $10.40/unit.
The Purchases Manager has provided the following information:
o Ending inventory for each quarter is to be 40% of next quarter’s sales.
o Next year’s 1st Quarter Sales are estimated to be 10,000
o Estimated purchase price of $3.00/unit.
The Accounting Department Manager has provided the following information:
• Selling Expenses (round to the nearest 10 dollars):
o Advertising Expense is calculated at 2.2 % of the Net Sales
o Delivery Expense is calculated at $0.25 per unit
o Depr. Expense - Delivery Equip. is calculated at $2,000 per year equally
divided
o Depr. Expense - Warehouse Equip. is calculated at $4,000 per year
equally divided
o Miscellaneous Expense - Sales is calculated at 0.5% of net sales
o Salary Expense - Commissions is calculated at 4% of net sales
o Salary Expense - Regular: 1st Quarter 5,190; 2nd Quarter 5,670; 3rd
Quarter 6,000; 4th Quarter 4,510
o Supplies Expense - Sales is calculated at 0.6% of net sales
• Administrative Expenses:
o Depr. Expense - Office Equipment is calculated at $1,200 per quarter
o Insurance Expense is calculated at $600 per quarter
o Miscellaneous Expense - Administrative is calculated at 35% of
Administrative Salaries
o Payroll Taxes Expense is calculated at 12% of Total Projected Salaries
o Rent Expense is calculated at $3,000 per quarter
o Salary Expense is calculated at $8,150 per quarter
o Supplies Expense - Administrative is calculated at 0.7% of net sales
o Uncollectible Accounts Expense is calculated at 0.6% of net sales
o Utilities is calculated at:
• 1st Quarter - $1,970
• 2nd Quarter - $1,170
• 3rd Quarter - $1,170
• 4th Quarter - $1,580
TriStar Inc.
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• Cash Receipts:
o 4th Quarter Sales for the previous year was $125,115
o 80% of a quarter’s net sales are collected during the same quarter (60%
are cash sales, 20% are sales on account collected)
o 19.4% of a quarter’s net sales are collected in the following quarter in
which they were made
o 0.6% of sales are deemed uncollectible (this is recorded in the
Administrative Expense Budget)
• Cash Payments:
o Prior year's 4th Quarter purchases was $25,180
o 70% of all purchases are paid for during the same quarter (10% are cash
payments, 60% are purchases on account paid for in the quarter)
o 30% of all purchases are paid for in the following quarter
o Selling Expenses is calculated as follows: Total Selling Expenses - (Depr
Exp for Delivery and Warehouse Equipment)
o Administrative Expenses is calculated as follows: Total Administrative
Expenses - (Depr. Exp Office Equipment and Uncollectible Accts Exp)
• Beginning Cash Balance is $21,280
• the Cash Balance - Beginning is the Ending Cash Balance from the previous
quarter.
• Federal Income Tax is estimated at 22.3% of Gross Income divided equally over the
•
4 quarters (round to the nearest $100).
From the beginning Balance Sheet:
o Building = $5,000
o Retained Earnings = $83,440
o Common Stock = 5,000 @ $10 each
For the Master Budget, you are expected to prepare the following:
• Sales Budget
• Purchases Budget
• Selling Expense Budget
• Administrative Expense Budget
• Budgeted Income Statement
• Cash Receipts Budget
• Cash Payments Budget
• Cash Budget
• Budgeted Balance Sheet
TriStar Inc.
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