Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression on the president and have assembled the information below. The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows: January (actual) February (actual) March (actual) 28,500 June 67,000 43,000 July 47,000 April May 56,000 August 82,000 116,000 45,000 September 42,000 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next month's sales in units. The necklaces cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month's sales are collected by month-end. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The company's monthly selling and administrative expenses are given below: The company's monthly selling and administrative expenses are given below: Variable: Sales commissions Fixed: Advertising Rent 4% of sales $251,000 26,500 Wages and salaries 126,400 Utilities Insurance Depreciation 13,800 6,400 31,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,800 in new equipment during May and $57,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,800 in new equipment during May and $57,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: Cash Accounts receivable ($43,000 February sales; $448,000 March sales) Inventory Prepaid insurance Fixed assets, net of depreciation Total assets Accounts payable Dividends payable Common shares Retained earnings Assets Liabilities and Shareholders' Equity Total liabilities and shareholders' equity $ 91,000 491,000 131,200 44,800 1,035,000 $1,793,000 $ 132,800 18,400 970,000 671,800 $1,793,000 The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month, with any repayments made at the end of the month. The interest rate on these loans is 1% per month and must be paid at the end of each month based on the outstanding loan balance for that month. Required: 1. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: a. A sales budget by month and in total. Sales budget April May June Quarter Budgeted sales in units 82,000 116,000 67,000 265,000 Selling price per unit $ 10 $ 10 $ 10 $ 10 Total sales $820,000 S 1,160,000 $ 670,000 $ 2,650,000 b. A schedule of expected cash collections from sales, by month and in total. KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April May June Quarter February sales S 43,000 $ 43,000 March sales April sales May sales 392,000 56,000 448,000 164,000 574,000 82,000 820,000 232,000 812,000 1,044,000 June sales 134,000 134,000 Total cash collections $ 599,000 $ 862,000 $ 1,028,000 $ 2,489,000 c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. KNOCKOFFS UNLIMITED Merchandise Purchases Budget April May June Quarter Budgeted sales in units 82,000 116,000 67,000 265,000 Add: Budgeted ending inventory 46,400 26,800 18,800 18,800 Total needs 128,400 142,800 85,800 283,800 Less: Beginning inventory 32,800 46,400 26,800 32,800 Required unit purchases Unit cost 95,600 96,400 59,000 251,000 SS $ $ 4 $ 4 $ 4 Required dollar purchases $ 382,400 $ 385,600 $ 236,000 $ 1,004,000 d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. KNOCKOFFS UNLIMITED Schedule of Expected Cash Disbursements April May June March purchases $ 132,800 Quarter $ 132,800 April purchases 191,200 191,200 382,400 May purchases 192,800 192,800 385,600 June purchases 118,000 118,000 Total cash disbursements $ 324,000 $ 384,000 $ 310,800 $ 1,018,800 Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression on the president and have assembled the information below. The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows: January (actual) February (actual) March (actual) 28,500 June 67,000 43,000 July 47,000 April May 56,000 August 82,000 116,000 45,000 September 42,000 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next month's sales in units. The necklaces cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month's sales are collected by month-end. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The company's monthly selling and administrative expenses are given below: The company's monthly selling and administrative expenses are given below: Variable: Sales commissions Fixed: Advertising Rent 4% of sales $251,000 26,500 Wages and salaries 126,400 Utilities Insurance Depreciation 13,800 6,400 31,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,800 in new equipment during May and $57,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,800 in new equipment during May and $57,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: Cash Accounts receivable ($43,000 February sales; $448,000 March sales) Inventory Prepaid insurance Fixed assets, net of depreciation Total assets Accounts payable Dividends payable Common shares Retained earnings Assets Liabilities and Shareholders' Equity Total liabilities and shareholders' equity $ 91,000 491,000 131,200 44,800 1,035,000 $1,793,000 $ 132,800 18,400 970,000 671,800 $1,793,000 The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month, with any repayments made at the end of the month. The interest rate on these loans is 1% per month and must be paid at the end of each month based on the outstanding loan balance for that month. Required: 1. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: a. A sales budget by month and in total. Sales budget April May June Quarter Budgeted sales in units 82,000 116,000 67,000 265,000 Selling price per unit $ 10 $ 10 $ 10 $ 10 Total sales $820,000 S 1,160,000 $ 670,000 $ 2,650,000 b. A schedule of expected cash collections from sales, by month and in total. KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April May June Quarter February sales S 43,000 $ 43,000 March sales April sales May sales 392,000 56,000 448,000 164,000 574,000 82,000 820,000 232,000 812,000 1,044,000 June sales 134,000 134,000 Total cash collections $ 599,000 $ 862,000 $ 1,028,000 $ 2,489,000 c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. KNOCKOFFS UNLIMITED Merchandise Purchases Budget April May June Quarter Budgeted sales in units 82,000 116,000 67,000 265,000 Add: Budgeted ending inventory 46,400 26,800 18,800 18,800 Total needs 128,400 142,800 85,800 283,800 Less: Beginning inventory 32,800 46,400 26,800 32,800 Required unit purchases Unit cost 95,600 96,400 59,000 251,000 SS $ $ 4 $ 4 $ 4 Required dollar purchases $ 382,400 $ 385,600 $ 236,000 $ 1,004,000 d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. KNOCKOFFS UNLIMITED Schedule of Expected Cash Disbursements April May June March purchases $ 132,800 Quarter $ 132,800 April purchases 191,200 191,200 382,400 May purchases 192,800 192,800 385,600 June purchases 118,000 118,000 Total cash disbursements $ 324,000 $ 384,000 $ 310,800 $ 1,018,800
Expert Answer:
Related Book For
Managerial Accounting
ISBN: 978-1259024900
9th canadian edition
Authors: Ray Garrison, Theresa Libby, Alan Webb
Posted Date:
Students also viewed these accounting questions
-
93DBC 16093DBC (6) concentration? What are the causes of stress concentration & 4B9 890 AG A6F2 90A6F2E 16F2E4 6F2E46) 2E461 Q.3. Any two a) What is stress remedies for stress concentration....
-
Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past...
-
Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past...
-
A mail-order firm processes 5,300 checks per month. Of these, 60 percent are for $55 and 40 percent are for $80. The $55 checks are delayed two days on average; the $80 checks are delayed three days...
-
Draw the two-port network that has the following y parameters: 1 -0.5 Ly|-|-0.5 1.5
-
1.If a private company with break-even operations received a $10 million investment, how would you develop a strategy to spend or invest that money? 2.What challenges have you faced in leading a team...
-
How has the ownership of UK shares changed over the past 50 years?
-
Yamada Industries is considering selling excess machinery with a book value of $220,000 (original cost of $600,000 less accumulated depreciation of $380,000) for $200,000, less a 6% brokerage...
-
Pre-lab Assignment A. Power Gain dB Calculations 1. [3 marks] Calculate given power ratios rounded to 3 significant figures and then express them in dB: 123W/456mW: 0.00123W/456mW- 888pW/66nW= 2. [2...
-
The famous American hamburger chain Fat and Spicy (F&S) is considering expanding its operations to Australia. F&S is considering opening a restaurant in two locations, one each in Sydney and...
-
At the bottom of a bottle a bubble within carbonated water has a diameter of 0.2 mm Determine the bubble's diameter when it reaches the surface. The temperature of the water and bubbles is 10C, and...
-
A company has a beginning retained earnings balance of $100,000. It has a net income of $50,000 for the current year and paid $10,000 to the owner as an owner withdrawal. The ending balance of...
-
What is the indicated value by the sales comparison approach of a three-bedroom, two-bath home with a deck and a spa? Market research indicates that the spa and deck are worth $4,200 and a half-bath...
-
The following information is available for the Foster Co. Beginning Inventory: Cost $28,000 Retail $55,000 Purchases: Cost $61,000 Retail $88,000 Sales: $91,000 Required: 1. Estimate the value of the...
-
A method of determining a company's cost of retained earning is the own bond plus risk premium approach. This approach assumes that the risk of a company is embedded in its bond yield and the...
-
Suppose you purchased one of SWH's bonds on the day it was issued. The bond had a coupon rate of 5.5% (paid semiannually), the par value of $1,000, and a 15-year maturity. The investors' required...
-
During the month, services performed for customers on account amounted to $7,500 and collections from customers in payment of their accounts totaled $6,000. At the end of the month, the Accounts...
-
Although much of the work of an equity analyst involves quantitative analysis, some analysts also engage in various qualitative analyses to help them assess the persistence of a firms current...
-
It is common to see share prices of a company increase with the announcement of good news from the company. It is also the case that record earnings qualify as very good news. The behavior of stock...
-
On September 11, 2001, two American Airlines aircraft were hijacked and destroyed in terrorist attacks on The World Trade Center in New York City and the Pentagon in northern Virginia. As a...
Study smarter with the SolutionInn App