Question

Problem 14-22 Preparing budgets with multiple products 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.

	1st Quarter	2nd Quarter	3rd Quarter	4th Quater	Total
Peaches	80,000	100,000	160,000	140,000	480,000
Oranges	200,000	225,000	285,000	190,000	900,000
Total	280,000	325,000	445,000	330,000	1,380,000

Based on the company’s past experience, cost of goods sold is usually 60 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

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

B. If the selling and administrative expenses are estimated to be $350,000, prepare the company’s budgeted annual income statement.

C. Ms. Jasper estimates next year’s ending inventory will be $10,000 for peaches and $20,000 for oranges. Prepare the company’s inventory purchases budgets for the next year, showing quarterly figures by product.

Answer 1

A.

Jasper Fruits Corporation
Sales Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
Peaches	84000	105000	168000	147000	504000
Oranges	220000	247500	313500	209000	990000
Total Sales Revenue	304000	352500	481500	356000	1494000

B.

Jasper Fruits Corporation
Budgeted Annual Income Statement
Sales revenue	1494000
Cost of goods sold	896400
Gross profit	597600
Selling and administrative expenses	350000
Net income	247600

C.

Jasper Fruits Corporation
Inventory Purchases Budget
	1st Quarter	2nd Quarter	3rd Quarter	4th Quarter	Total
Peaches:
Sales	84000	105000	168000	147000	504000
Cost of goods sold	50400	63000	100800	88200	302400
Desired ending inventory as percent of next quarter's cost of goods sold	10%	10%	10%	10%
Ending inventory	6300	10080	8820	10000	10000
Total inventory required	56700	73080	109620	98200	312400
Less: Beginning inventory	5040	6300	10080	8820	5040
Budgeted inventory purchases $	51660	66780	99540	89380	307360
Oranges:
Sales	220000	247500	313500	209000	990000
Cost of goods sold	132000	148500	188100	125400	594000
Desired ending inventory as percent of next quarter's cost of goods sold	10%	10%	10%	10%
Ending inventory	14850	18810	12540	20000	20000
Total inventory required	146850	167310	200640	145400	614000
Less: Beginning inventory	13200	14850	18810	12540	13200
Budgeted inventory purchases $	133650	152460	181830	132860	600800
Total budgeted inventory purchases $	185310	219240	281370	222240	908160