5. Budgeting (I): 15 marks Megatron started his own book-dealing business a few years ago. His business is a combination of retailing and wholesaling, that is, not only individual customers but also other book shops purchase books from him. This year, Megatron expects the sales revenue will be: Month Sales revenue April May $14,000 $15,500 June $18,500 July August September $20,000 $22,250 $23,250 On average, 30% of total sales are contributed by individual customers who purchase books and pay cash immediately, all the sales to book shops are credit sales, and 60% will pay one month later and 10% pay two months after the date of sales. Actual sales for March were $12,500 and $11,250 for February. The average selling price of $25 per book has remained constant this year. For budgeting purpose, Megatron estimates that cost of goods sold is 72% of sales. Megatron has a policy that the ending inventory of each month should be sufficient to cover 30% of the next month's projected sales. All the purchases are credit purchases and suppliers allow Megatron to pay one month after the date of purchase. The amount owing to suppliers at the end of March is $9,324. The closing inventory balance at the end of March is $3,024. Megatron expects to incur the following expenses each month: Rent $600; General overheads $950 (this includes Depreciation of $250); Advertising $250 and Salaries $1,000. The expenses are paid in the month they are incurred. The closing cash balance at the end of March is $3,000. Megatron intends to refurbish the front area of his shop in June at a cost of $8,000, payable at the end of that month, the refurbishment will be reported as a fixed asset and depreciated in the following months. (b) Prepare a purchases budget for Megatron's Book Shop and answer the following questions. (Hint: You do NOT need to fill in the whole table below, the table can be helpful to your calculation and organise your solution). April May June Purchases Budget (books) Cost of goods sold Closing Inventory Books needed Less: Opening Inventory Purchases April May June Payment for purchase ($) Purchases Payment for purchases (i) What is the closing inventory in April? (ii) What is the cost of goods sold in May? (iii) What is the budgeted payment for purchase in June? (3 marks) Prepare other expenses payment budget in dollars for Megatron's Book Shop and answer the following questions. (Hint: You do NOT need to fill in the whole table below, the table can be helpful to your calculation and organise your solution). (c) April May June (1)Budgeted rent expenses Expected cash payments for rent (2)Budgeted general overheads expenses Expected cash payments for overheads (3)Budgeted advertising expenses Expected cash payments for advertising (4) Budgeted salaries expenses Expected cash payments for salaries (i) What is the expected cash payment for rent in April? (ii) What is the expected cash payment for overheads in May? (iii) What is the expected cash payment for advertising in June