Budgeting Basics and Beyond

6.2. Sales Budget

The sales budget is the starting point in preparing the master budget, since estimated sales volume influences nearly all other items appearing throughout the master budget. The sales budget should show total sales in quantity and value. The expected total sales can be break-even or target income sales or projected sales. It may be analyzed further by product, by territory, by customer, and, of course, by seasonal pattern of expected sales.

Generally, the sales budget includes a computation of expected cash collections from credit sales, which will be used later for cash budgeting.

Schedule 1

Table 6.1. THE PUTNAM COMPANY Sales Budget For the Year Ended December 31, 20B

Quarter
	1	2	3	4	Year as a Whole
Expected sales in units[]	1,000	1,800	2,000	1,200	6,000
Unit sales price[]	× $150	× $150	× $150	× $150	× $150
Total sales	$150,000	$270,000	$300,000	$180,000	$900,000
[]

^[] Given

Schedule of Expected Cash Collections
Accounts receivable, 12/31/20A	$100,000[]				$100,000
1st-quarter sales ($150,000)	60,000[]	$90,000[]			150,000
2nd-quarter sales ($270,000)		108,000	$162,000		270,000
3rd-quarter sales ($300,000)			120,000	$180,000	300,000
4th-quarter sales ($180,000)				72,000	72,000
Total cash collections	$160,000	$198,000	$282,000	$252,000	$892,000
[]
[]
[]

^[] All of the $100,00 accounts receivable balance is assumed to be collectible in the first quarter.

^[] 40 percent of a quarter's sales are collected in the quarter of sale.

^[] 60 percent of a quarter's sales are collected in the quarter following.