Scribd Logo
Upload

Welcome to Scribd!

  • 13 views

    Phantom Boutique

    Uploaded by

    breannabellamilne
    The document provides information about Phantom Boutique, a new T-shirt business, including its estimated sales and purchases for the first quarter of 2021. It also provides additional data on sales policies, inventory purchases, operating expenses and initial cash balance. The required tasks are to prepare budgets for sales, purchases, operating expenses and cash for the first quarter. The cash budget shows an ending cash surplus which could be utilized by putting in a savings account, leaving as a buffer, or spending more on marketing given potential dropping sales.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    Phantom Boutique

    Uploaded by

    breannabellamilne
    13 views3 pages
    The document provides information about Phantom Boutique, a new T-shirt business, including its estimated sales and purchases for the first quarter of 2021. It also provides additional data on sales policies, inventory purchases, operating expenses and initial cash balance. The required tasks are to prepare budgets for sales, purchases, operating expenses and cash for the first quarter. The cash budget shows an ending cash surplus which could be utilized by putting in a savings account, leaving as a buffer, or spending more on marketing given potential dropping sales.

    Original Description:

    lol

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The document provides information about Phantom Boutique, a new T-shirt business, including its estimated sales and purchases for the first quarter of 2021. It also provides additional data on sales policies, inventory purchases, operating expenses and initial cash balance. The required tasks are to prepare budgets for sales, purchases, operating expenses and cash for the first quarter. The cash budget shows an ending cash surplus which could be utilized by putting in a savings account, leaving as a buffer, or spending more on marketing given potential dropping sales.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    13 views3 pages

    Phantom Boutique

    Uploaded by

    breannabellamilne
    The document provides information about Phantom Boutique, a new T-shirt business, including its estimated sales and purchases for the first quarter of 2021. It also provides additional data on sales policies, inventory purchases, operating expenses and initial cash balance. The required tasks are to prepare budgets for sales, purchases, operating expenses and cash for the first quarter. The cash budget shows an ending cash surplus which could be utilized by putting in a savings account, leaving as a buffer, or spending more on marketing given potential dropping sales.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Learning Resources

    Problem

    Phantom Boutique (2023)


    Scenario
    Lee is the owner and manager of Phantom Boutique which has just started to sell T-shirts in
    Auckland. The selling price for each T-shirt is $80. Lee is about to begin the budget process for the
    the first quarter (January, February, and March) of 2021. The estimated sales and purchases for the
    first quarter are the following:

    January February March


    Budgeted Sales units 600 500 400
    Budgeted purchases units 620 520 420

    The following data shows sales and inventory purchase policies, and cash related information:
     All sales are on credit. Collections from accounts receivable normally have the following
    pattern: 60 per cent in the month of sale, 30 per cent in the month following the sale and 10
    per cent in the second month following the sale. Fortunately, Phantom Boutique does not
    have much trouble with bad debts.
     The purchase price for each T-shirt is $40 and the business will pay for the inventory
    purchases in the month following the purchase.
     Lee also expects to incur the following operating expenses for each month of this year.
    These expenses must be paid in the month that they are incurred.

    Rent expense $4,000 per month


    Salary expense $3,200 per month
    Marketing expense $2,600 in January
    General and Administration (G&A) expenses $1,000 per month

    Required
    1. Prepare a sales budget for Phantom Boutique for the first quarter.

    Sales Budget
    First
    January February March
    Quarter
    Budgeted Sales units 600 500 400 1500
    Selling Price per unit X 80 80 80 80
    Budgeted total sales revenue = 48000 40000 32000 120000
    Expected cash collections: 4800 1200 19200 25200

    Workings for cash collections:

    Total sales on Cash collections Cash Cash


    credit for January collections for collections for
    February March
    January 48000 28800 14400 4800
    February 40000 24000 12000
    March 32000 19200
    TOTAL 25200

    Page 1 of 3
    Problem: Phantom Boutique

    2. Prepare a purchases budget for Phantom Boutique for the first quarter.

    Retail Purchases Budget


    First
    January February March
    Quarter
    Budgeted Purchases units 620 520 420 1560
    Purchase Price 40 40 40 40
    = Cost of Purchases $ 24800 20800 16800 62400
    Expected Cash Payments 0 24800 20800

    3. Prepare an operating expenses budget for the first quarter.

    Operating Expenses Budget


    First
    January February March
    Quarter
    Rent expenses
    4000
    Salaries expenses 3200
    Marketing expense 2600
    G&A Expenses 1000
    Total operating expenses

    Expected Cash Payments for


    operating expenses

    4. Prepare a cash budget for the first quarter of the year, assuming that at the end of December
    2020, the business has a cash balance of $5,000.

    Cash Budget
    First
    January February March
    Quarter
    Cash Receipts from Sales (1)
    28800 38400 3600 103200
    Less Cash payments:
    Cash pay for purchases (2) 0 24800 20800 45600
    Cash pay for operating
    10800 8200 8200 27200
    expenses (3)
    Total Payments 10800 33000 29000 72800
    =Net cash from operations 18000 5400 7000 30400
    Add: Beginning Cash balance 5000 23000 28400 5000
    =Ending Cash balance 23000 28400 35400 35400
    *Given in the question

    Page 2 of 3
    Problem: Phantom Boutique
    5. Discuss how you can utilise the cash surplus.
    Put money in short-term saving account and earn interest.
    Leave cash in the bank as. a buffer for unanticipated events.
    Spend more money on marketing as sales may be dropping.

    Page 3 of 3

    You might also like