Question

# Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to...

Jasper Fruits Corporation wholesales peaches and oranges. Barbara Jasper is working with the company’s accountant to prepare next year’s budget. Ms. Jasper estimates that sales will increase 5 percent for peaches and 10 percent for oranges. The current year’s sales revenue data follow.

 First Quarter Second Quarter Third Quarter Fourth Quarter Total Peaches \$ 223,000 \$ 243,000 \$ 303,000 \$ 243,000 \$ 1,012,000 Oranges 403,000 453,000 573,000 383,000 1,812,000 Total \$ 626,000 \$ 696,000 \$ 876,000 \$ 626,000 \$ 2,824,000

Based on the company’s past experience, cost of goods sold is usually 65 percent of sales revenue. Company policy is to keep 10 percent of the next period’s estimated cost of goods sold as the current period’s ending inventory. (Hint: Use the cost of goods sold for the first quarter to determine the beginning inventory for the first quarter.)

Required

1. Prepare the company’s sales budget for the next year for each quarter by individual product.

2. If the selling and administrative expenses are estimated to be \$700,000, prepare the company’s budgeted annual income statement.

3. Ms. Jasper estimates next year’s ending inventory will be \$35,500 for peaches and \$57,400 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

 a) Sales budget for next year for each quarter (Amount in \$) Quarter I Quarter II Quarter III Quarter IV Total Peaches 234,150 255,150 318,150 255,150 1,062,600 Oranges 443,300 498,300 630,300 421,300 1,993,200 Total 677,450 753,450 948,450 676,450 3,055,800
 b) Budgeted Annual Income Statement Particulars (Amount in \$) a Total Estimated Sales 3,055,800 b Cost of Goods Sold 1,986,270 (65% of sales) c Gross Margin (a-b) 1,069,530 d Selling and administrative expenses 700,000 e Budgeted Income 369,530
 c) Inventory Purchase budget for next year (Amount in \$) Peaches Quarter I Quarter II Quarter III Quarter IV a Estimated Sales 234,150 255,150 318,150 255,150 b Ending Inventory (10% of next quarter sales) 25,515 31,815 25,515 35,500 c Opening Inventory (10% of same quarter sales) 23,415 25,515 31,815 25,515 d Purchases (a+b-c) 236,250 261,450 311,850 265,135 Oranges Quarter I Quarter II Quarter III Quarter IV a Estimated Sales 443,300 498,300 630,300 421,300 b Ending Inventory (10% of next quarter sales) 49,830 63,030 42,130 57,400 c Opening Inventory (10% of same quarter sales) 44,330 49,830 63,030 42,130 d Purchases (a+b-c) 448,800 511,500 609,400 436,570

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