STRATEGIC COST MANAGEMENT

FINANCIAL BUDGETS

1
December sales (P310,000 x 65%) P201,500
November sales (P290,000 x 33%) 95,000
Expected Cash collections in December P297,200

2 Sales COGS
November P290,000 P232,000
December P310,000 P248,000
January P210,000 P168,000

Merchandise purchases = Ending Inventory + COGS - Beginning Inventory

Merchandise purchases = (P168,000 x 70%) + P248,000 - (P248,000 x 70%)
Merchandise purchases = P117,600 + P248,000 - P173,600 = P192,000

3 Sales COGS
November P290,000 P232,000
December P310,000 P248,000
January P210,000 P168,000

December Cash Disbursements= 70% of December COGS + 30% of November COGS

December Cash Disbursements= (70% x P248,000) + (30% x P232,000)
December Cash Disbursements= P172,600 + P69,600 = P243,200

4
Cash Collections - Cash Disbursements - Other monthly expenses
P297,200 - P243,200 - P21,100 = P32,900
 5
Net sales (P310,000 x 100% - 2%) P303,800
COGS (P310,000 x 80%) (248,000)
Gross Margin 55,800
Depreciation Expense (21,000)
Selling and Administrative Expense (21,100)
NET INCOME = P13,700

6
For November
Collection in November (Existing cash in October
(P77,000 + (65% x 290,000 of November) P 265,500
Purchases (Accounts Payable) (239,000)
Payment for merchandise is made in the following:
Monthly Expenses (to pay in cash) (21,100)

Excess cash in November P 5,400

For December
Collection in December
(65% x 310,000 of December) + (33% x 290,000 in November) P 297,200
Purchases (Accounts Payable)
(80% x 30% x P290,000 for November) + (80% x 70% (243,200)
Payment for merchandise is made in the following:
Monthly Expenses (to pay in cash) (21,100)
Excess cash in December P 32,900

Cash balance at the end of December

Cash , October P 25,000
Excess cash in November 5,400
Excess cash in December 32,900
TOTAL CASH P 63,300

7
For December sales (P310,000 x 33%) = P 102,300
8 Sales COGS
November P 290,000 P 232,000
December P 310,000 P 248,000
January P 210,000 P 168,000

Purchases in December = (P 168,000 x 70%) + P 248,000 - (P 248,000 x 30%)

Purchases in December = P 117,600 + P 74,400
Purchases (Accounts Payable) = P 192,000

9
Net Income Calculation for November:
Net sales (P 290,000 x 98%) P 284,200
COGS (P 290,000 x 80%) (232,000)
Gross Margin 52,200
Depreciation Expense (21,000)
Selling and Administrative Expense (21,100)
Net Income for November P 10,100

Net Income Calculation for December:

Net sales (P 310,000 x 100% - 2%) P 303,800
COGS (P 310,000 x 80%) (248,000)
Gross Margin 55,800
Depreciation Expense (21,000)
Selling and Administrative Expense (21,100)
Net Income for December P 13,700

Retained Earnings in December:

Retained earnings in October P 311,400
Net income for November 10,100
Net income for December 13,700
RETAINED EARNINGS IN DECEMBER P 335,200