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1) Sales Budget and Expected Cash Collections

The marketing department of Jessi Corporation has submitted the following sales forecast for the upcoming fiscal year (all sales are on account):

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

Budgeted unit sales

11,000

12,000

14,000

13,000

The selling price of the company’s product is $18.00 per unit. Management expects to collect 65% of sales in the quarter in which the sales are made, 30% in the following quarter, and 5% of sales are expected to be uncollectible. The beginning balance of accounts receivable, all of which is expected to be collected in the first quarter, is $70,200.

Required:

  1. Calculate the estimated sales for each quarter of the fiscal year and for the year as a whole.
  2. Calculate the expected cash collections for each quarter of the fiscal year and for the year as a whole.

2) Prepare a Flexible Budget

Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company’s static budget for May appears below:

Puget Sound Divers
Static Budget
For the Month Ended May 31

Budgeted diving-hours (q)

100

Revenue ($365.00q)

$36,500

Expenses:

Wages and salaries ($8,000 + $125.00q)

20,500

Supplies ($3.00q)

300

Equipment rental ($1,800 + $32.00q)

5,000

Insurance ($3,400)

3,400

Miscellaneous ($630 + $1.80q)

810

Total expense

30,010

Net operating income

$   6,490

During May, the company’s actual activity was 105 diving-hours.

Required:

Prepare a flexible budget for May.

3) Prepare a Flexible Budget Performance Report

Vulcan Flyovers offers scenic overflights of Mount St. Helens, the volcano in Washington State that explosively erupted in 1982. Data concerning the company’s operations in July appear below:

Vulcan Flyovers
Operating Data
For the Month Ended July 31

Actual
Results

Flexible
Budget

Static
Budget

Flights (q)

48

48

50

Revenue ($320.00q)

$13,650

$15,360

$16,000

Expenses:

Wages and salaries ($4,000 + $82.00q)

8,430

7,936

8,100

Fuel ($23.00q)

1,260

1,104

1,150

Airport fees ($650 + $38.00q)

2,350

2,474

2,550

Aircraft depreciation ($7.00q)

336

336

350

Office expenses ($190 + $2.00q)

460

286

290

Total expense

 12,836

12,136

   12,440

Net operating income

$ 814

$ 3,224

$    3,560

The company measures its activity in terms of flights. Customers can buy individual tickets for overflights or hire an entire plane for an overflight at a discount.

Required:

  1. Prepare a flexible budget performance report for July that includes flexible-budget variances and sales-volume variances.
  2. Which of the variances should be of concern to management? Explain.

The ansewr ::-

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