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Propose a budget for the forthcoming quarter

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Propose a budget for the forthcoming quarter.  You have consulted with the sales manager and find that:

 

Estimated sales are as follows:

February	$265,000	April	$290,000
March	$255,000	May	$250,000
		June	$280,000

 

In consultation with the procurement manager you estimate that the cost of goods sold is to be budgeted at 45% of the sales figure.  The salaries are expected to be $65,000 per month. When sales exceed $260,000 in any one month, the sales team is entitled to an additional 5% commission on the excess sales over this figure. Other expenses are estimated to be $35,000 per month. 

 

The management is concerned about the cash flow as the collection of cash from sales is slow and this could possibly lead to cash flow problems to the organisation.  It is estimated that 80% of the total sales are going to be cash sales where the bill is settled when the goods are purchased or delivered.  10% of the month's sales settle the accounts owed in the month following sales. Others (i.e. 10% of the month's sales) settle in the month after.

 

 

Additional information:

The organisation gets a month's credit on its purchases.  That is, the accounts for the purchases (COGS) made in one month is settled in the following month. 

 

• All salaries are paid in the month as they are incurred.
• The additional commission is paid in the month after the month in which it was earned.
• Other expenses are paid in the month they were incurred.
• The bank balance at the beginning of the first month is estimated to be $40,000.

 

1.1 Fill out the table below to show the profit and loss calculations for the quarter April, May and June.

	April	May	June
	$	$	$
Sales	290,000	250,000	280,000
Less Cost of Goods Sold
Gross Profit
Sales Salaries
Commission
Other expenses
Total expenses
Net Profit