Accounting Business Reporting for Decision Making

416 Accounting: Business Reporting for Decision Making

month’s forecasted cost of sales. With respect to sales on account, 40 per cent of receivables are

collected in the month of sale, 50 per cent are collected in the month following, and 10 per cent

are never collected.

Required

a. What is the anticipated cost of sales for June?

b. What is the beginning inventory for July expected to be?

c. What are the July purchases expected to be?

d. What are the forecasted July cash collections?

9.57 Preparation of sales and operating expenses budgets and budgeted statement of

profit or loss statement    LO4

Mike Triump is the owner/manager for Online Logistic Solutions, which is a small transport and

courier company that provides logistic services to business. Mike is about to start the budget pro-

cess for 2018. His marketing manager has contacted customers and analysed market trends, and

expects sales to online traders to increase by 30 per cent in 2018. One of the major customers

has predicted that their sales will increase 109 per cent next year. Mike is very confident that

his business will meet the estimated sales growth for 2018. In contrast, transport to local traders

is expected to increase by no more than 3 per cent in 2018. The sales activity for 2017 was as

follows:

Online Traders Local Traders Total

March Quarter $1 000 000 $ 800 000 $1 800 000

June Quarter 900 000 600 000 1 500 000

September Quarter 800 000 700 000 1 500 000

December Quarter 1 500 000 1 100 000 2 600 000

Total $4 200 000 $3 200 000 $7 400 000

Operating expenses

Given the expected increase in sales volumes for 2018, the Office Manager has held meet-

ings with the drivers and sales personnel to identify resources needed to support the increased

activity. To assist their deliberations, the statement of profit or loss for 2017 was used as a basis

for discussion.

Online Logistic Solutions

Statement of profit or loss for the financial year ended 31 December 2017

$

Sales 7 400 000

Less: Operating expenses

General administration expenses 800 000

Utilities

Gas

Electricity

Wages

Sales commission

Loan interest

Marketing expenses

Vehicle-related expenses

Depreciation on vehicle fleet

10 000

30 000

1 400 000

370 000

50 000

100 000

2 000 000

800 000

Total operating expenses 5 560 000

Profit 1 840 000