9:40 5G Done Online_budgets descriptio... BUDGETS Jay Rexford, president of Photo Artistry Company, was just concluding a budget meeting with his senior staff. It was November of 20x1, and the group was discussing preparation of the firm's master budget for 20x2. "I've decided to go ahead and purchase the industrial robot we've been talking about. We'll make the acquisition on January 2 of next year, and I expect it will take most of the year to train the personnel and reorganize the production process to take full advantage of the new equipment." In response to a question about financing the acquisition, Rexford replied as follows: "The robot will cost $950,000. There will also be an additional $50,000 in ancillary equipment to be purchased. We'll finance these purchases with a oneyear $1,000,000 loan from Shark Bank and Trust Company. I've negotiated a repayment schedule of four equal installments on the last day of each quarter. The interest rate will be 10 percent, and interest payments will be quarterly as well." With that the meeting broke up, and the budget process was on. Photo Artistry Company is a manufacturer of metal picture frames. The firm's two product lines are designated as S (small frames; 5 x 7 inches) and L. (large frames; 8 x 10 inches). The primary raw materials are flexible metal strips and 9inch by 24inch glass sheets. Each S frame requires a 2foot metal strip; an L frame requires a 3foot metal strip. Allowing for normal breakage and scrap glass, the company can get either four S frames or two L frames out of a glass sheet. Other raw materials, such as cardboard backing, are insignificant in cost and are treated as indirect materials. Emily Jackson, Photo Artistry's controller, is in charge of preparing the master budget for 20x2. She has gathered the following information: 1. Sales in the fourth quarter of 20x1 are expected to be 50,000 S frames and 40,000 L frames. The sales manager predicts that over the next two years, sales in each product line will grow by 5,000 units each quarter over the previous quarter. For example, S frame sales in the first quarter of 20x2 are expected to be 55,000 units. 2 Photo Artistry's sales history indicates that 60 percent of all calas are on cradit, with the remainder of the