1. Please provide formulas as to how you came up with the numbers

2. Provide 3 ways in which the company could increase their net income.

A. Information to be used in preparation of master budget: You have just been hired as a new management trainee by Earrings Limited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below. The bo mpany sells many styles of earrings, but all are sold for the same price- S10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): January (actual) February (actual) March (actual) April (budget) May (budget) 20,000 26,000 40,000 65,000 100,000 June (budget) July (budget) August (budget) September (budget) 50,000 30,000 28,000 25,000 The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. Suppliers are paid S4 for a pair of earrings. One-half of a month's purchases are paid for in the month of purchase; the other half is paid for 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 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. collected in the month of sale. An Monthly operating expenses for the company are given below Variable: Sales commissions 4% of sales Fixed Advertising Salarics Insurance S200,000 Rent Utilitics Depreciation 14,000 $18,000 7.000 3,000