Fundamentals of Cost Accounting 3rd Edition by William N. Lanen, Shannon W. Anderson, Michael Maher

Exercise 27

Estimate Cash Receipts

Scare-2-B-U (S2BU) specializes in costumes for all occasions. The average price of each of its costumes is $160. For each occasion, S2BU receives a 20 percent deposit two months before the occasion, 50 percent the month before, and the remainder on the day the costume is delivered. Based on information at hand, managers at S2BU expect to make costumes for the following number of occasions during the coming months:

April	75
May	45
June	30
July	60
August	75
September	165

Required

a. What are the expected revenues for S2BU for each month, April through September? Revenues are recorded in the month of the occasion.

b. What are the expected cash receipts for each month, April through July?

Step 1 of 3

Budgeting: Budgeting is a management accounting process. Various activities are performed to prepare a budget. Under the process of budgeting, budgets are prepared which act as a tool for decision making. Budgets are used by the management for taking various vital decisions.

Sales Budget: The most important component of a master budget. A sales budget estimates the sales/revenues for a defined period in units as well in value. A sales budget is prepared after considering various economic conditions, past performances, activity level, production capacity of the entity etc.