Bright World LLC (BW) distributes sunglasses to small retail stores in the Midwest part of the United States. BW does not manufacture the sunglasses, but instead buys the sunglasses from foreign sources and resells the sunglasses to small retail stores.

It is December of 2019 and you have been hired as BWs Budget Manager. BWs President, Gary Christens, has asked you to prepare a master budget for 2020. You have gathered the following information and are ready to begin preparing the budget.

Sales Information for BW:

Actual sales 2019 1st quarter 2nd quarter 3rd quarter 4th quarter	Pairs of Sunglasses sold 70,000 94,000 36,000 40,000
Forecasted sales 2020 1st quarter 2nd quarter 3rd quarter 4th quarter 1st quarter 2021	65,000 Your specific Input Your specific Input Your specific Input 58,000

Shipping firms and U.S. Customs have previously delayed sunglass shipments arriving from the foreign manufacturers. BW management has addressed this concern by establishing a policy that the ending inventory for a quarter should be 50% of the next quarters sales.

All sunglasses are sold for $12 per pair. All sales are on credit with no discount, and are payable in 30 days. BW has found that only 20% of a quarters sales are collected in the quarter of sale, with an additional 60% collected in the quarter following the sale, and the remaining 20% is collected in the second quarter following the sale. Bad debts have been insignificant and are not budgeted.

BW buys sunglasses from foreign suppliers. BW pays $5 per pair of sunglasses. 40% of a quarters purchase is paid for in the quarter of purchase, the other 60% is paid for in the quarter following the quarter of purchase.

BW plans to purchase new computer equipment costing $22,000 during the second quarter of 2020 and a new packing machine for $40,000 during the 3^rd quarter of 2020. Both of these equipment purchases will be for cash at the time of the purchase.

BW has a regular dividend pattern which is expected to continue during 2020. This pattern involves BWs board of directors declaring a $25,000 quarterly dividend on March 15^th, June 15^th, September 15^th, and December 15^th. The dividends are paid 30 days after the boards declaration.

Quarterly Operating Expenses expected for 2020:

Variable Expenses: Sales Commission	5% of sales revenue
Fixed Expenses: Advertising Rent Salaries Utilities Insurance Depreciation (includes the projected 2020 purchases)	$200,000 $18,000 $113,000 $9,000 $6,000 $14,000

Sales commissions are accrued in the quarter the sales are made, but are paid to the sales staff in the next quarter.

Insurance for a twelve month period is prepaid on October 1 of each year. All other expenses are paid in the quarter incurred.

The company requires a minimum cash balance of $50,000. All borrowings and repayments are done in even $1,000 increments. All borrowings are done on the first day of the quarter, and repayments are made on the last day of the quarter. Interest for all monies borrowed during a quarter is computed and accrued on the last day of the quarter and paid to the bank in the following quarter. Money borrowed is charged interest at a 7% annual rate.

[Borrowing and Interest Example - If BW computes that the company will need to borrow $20,000 for the first quarter, the loan would occur on January 1 and interest expense during the first quarter would be $350 and this interest would be paid to the bank in the second quarter. If in the second quarter, BW determines that it will be able to repay the $20,000 loan, the repayment would occur on the last day of the second quarter or June 30. Interest expense for the second quarter would $350 and this interest would be paid in the third quarter.]

Additional information gathered includes the Balance Sheet at year-end 2019 and the 2019 Income Statement. Bright World LLC

Balance Sheet

December 31, 2019

ASSETS: Cash Accounts Receivable Inventory Prepaid Insurance Property & Equipment Accumulated Depreciation	$74,000 470,400 162,500 18,000 975,000 (135,000)	Liabilities: Accounts Payable Dividends Payable Interest Payable Loans Payable Commissions Payable Total Liabilities Capital Stock Retained Earnings Total Stockholder Equity	157,500 25,000 0 0 24,000 206,500 800,000 558,400 1,3558,400
Total Assets	$1,564,900	Total Liabilities and Stockholders Equity	$1,564,900

Bright World LLC

Income Statement

Year Ended December 31, 2019

Sales Cost of Goods Sold: Beginning Inventory Purchases Goods Available for Sale Ending Inventory Cost of Goods Sold Gross Profit Operating Expenses: Advertising Expense Rent Expense Salaries Expense Utility Expense Insurance Expense Commission Expense Depreciation Expense Total Operating Expenses Income Before Interest Expense Interest Expense Net Income

2,880,000 175,000 1,187,500 1,362,500 162,500 1,200,000 1,680,000 700,000 72,000 411,000 28,000 24,000 144,000 52,000 1,431,000 249,000 6,700 242,300

REQUIRED:

Your Budget Report is due prior to class on April 21, 2020.

All submitted information must be typed.

Beginning Your Budget Project:

Unique unit sale information for the second, third, and fourth quarter of 2020 has been provided to you. Insert your unique unit sale information into the sales forecast on page 1 of this document. Please be aware that because of the unique 2020 sale information, the results in your Budget Project will be different from other students. For any questions you have on your Budget Project, please include your unique Budget Project Number listed on the top of your unique INPUT page.

inputs: 2nd quarter: $103,200, 3rd quarter 2020: $1,233,000, 4th quarter: 54,000

CHECK FIGURES:

1. total 2020 cash collections from sales 2906400

2.total 2020 CAsh payments for inventory

1st quarter Borrrowings 161000

1st quarter cash balance 50,700

2020 net income (loss) check figure 165,538

Your input sheet includes the following Check Figures:

• Total 2020 Cash Collections from Sales
• Total 2020 Cash Payments for Purchased Inventory
• First Quarter 2020 Borrowing on the Cash Budget
• First Quarter 2020 Ending Cash Balance on the Cash Budget
• Total 2020 Net Income

Begin Your Budget Project by preparing the following Budget Schedules:

All schedules listed below in Number 1, must be prepared by quarter and include an annual total column.

For all schedules in number 1 below round amounts to the nearest dollar. For all calculations in number 2 calculations should be to 3 decimal places. The pages referencing examples are just that, EXAMPLES. You need to use the assumptions given to prepare a schedule that fits the facts of the Budget you are preparing.

1) Prepare the following budget schedules for 2020.

1. A sales budget. See page 372
2. A schedule of expected cash collections from sales. See page 372
3. A merchandise purchases budget in units and in dollars. See page 374. The book mentions that a purchases budget can be prepared in dollars and in units. I would suggest preparing your merchandise purchase in units and when the units have been determined, multiple the units time the purchase price.
4. A schedule of expected cash disbursements for merchandise purchases.
5. A selling and administrative expense budget. See page 380.
6. A cash budget including borrowings and loan repayments. See page 382.
7. A budgeted Income Statement by quarter and total for 2020.
8. A budgeted Balance Sheet by quarter. There is no total column for the Balance Sheet.

2) Additional analysis information including (show computations):

1. Break Even in units and revenue dollars for budget year 2020.
2. Margin of Safety for 2020 in total dollar amount and percentage.
3. Contribution Margin for 2020.

inputs: 2nd quarter: $103,200, 3rd quarter 2020: $1,233,000, 4th quarter: 54,000

CHECK FIGURES:

1. total 2020 cash collections from sales 2906400

2.total 2020 CAsh payments for inventory

1st quarter Borrrowings 161000

1st quarter cash balance 50,700

2020 net income (loss) check figure 165,538

Normalegereak Review e ustom your views Goldies Headings Zoom to 100% Zoom to Selection New Window Arrange Freeze Freeze Freeze First All Panes Top Row Column Switch Unde Windows View Record Use Re Macros Macro Refere For the Year Ended December 31, 2019 Quarter Sales Budget 6 Budgeted Unit Sales (units/pairs) Selling PricePerUnit (S) Total Budgeted Sales 65000 $12 $780.000 103200 $12 1238400 30000 $12 $360,000 54000 $12 $648,000 Year 252000 $12 $3,026,400 COST: $5/8 325000516000 150000 270000 $1,261,000 Quarter 2 Year 12 Schedule of Expected Collections 3rd 2019 4th 2019 14 3rd quarter sales, 2019 86400 259200 15 4th quarter sales, 2019 96000 16 First Quarter Sales, 2020 17 Second Quarter Sales 18 Third Quarter Sales 19 Fourth Quarter Sales 20 Total Cash Collections 355200 $86,400 $288,000 $156,000 $96,000 $468,000 $247,680 $156,000 $ 743,040 $72,000 $247,680 $216,000 $129,600 $593,280 Remainder of money to collect, carried ove $72,000 to 1st 2021 $388,800 to 1st Q: $129,600 to 2nd Q $530,400 $811,680 $971.040 $2,906,400 21 Quarter 23 Merchandise Purchases Budget 24 25 Budgeted Unit Sales 26 Add: Desired Ending Merchandise Inventory 27 Total Needs 28 Less: Beginning Merchandise Inventory 29 Required Merchandise Purchases units units 30 cost per Unit 31 Required Cost of Merchandise Purchases dollars 40000 32500 72500 $20,000 52500 65000 51600 116600 32500 84100 $5.00 $420.500 1st60% 103200 15000 118200 51600 66600 $5.00 $333,000 30000 27000 57000 15000 42000 $5.00 $210.000 54000 29000 83000 27000 56000 $5.00 $280.000 Year 252200 29000 281200 32500 84100 $5.00 $1.243.500 $5 $262,500 40% Sheet Ready esc BIU Add: Desired Ending Merchandise Inventory Total Needs Less: Beginning Merchandise Inventory Required Merchandise Purchases units units Cost per Unit Required Cost of Merchandise Purchases dollars 32500 51600 72500 116600 $20,000 32500 52500 84100 $5 $5.00 $262,500 y $420,500 40% 1st60% 105000 $157,500 15000 118200 51600 66600 $5.00 $333,000 27000 57000 15000 42000 $5.00 $210,000 29000 83000 27000 56000 $5.00 $280,000 29000 281200 32500 84100 $5.00 $1,243,500 Quarter Year 31500 33640 Schedule of Cash Disbursements - Merchnadise 4th 2019 4th quarter purchases, 2019 beg. A/P 21000 1st Quarter Purchases, 2020 2nd Quarter Purchases 3rd Quarter Purchases 4th Quarter Purchases Total Disbursements for Materials in units cost per unit to purchase 50460 26640 39960 16800 65140 25200 22400 47600 $5 77100 56760 $5 $5 $5 $5 -Total Cash Disbursements for Materials in dolars $325,700 $385,500 $283,800 $238.000 $1,233,000 33 on 0 Selling and Administrative Expense Budget Quarter Year Sheet1 Ready Normalegereak Review e ustom your views Goldies Headings Zoom to 100% Zoom to Selection New Window Arrange Freeze Freeze Freeze First All Panes Top Row Column Switch Unde Windows View Record Use Re Macros Macro Refere For the Year Ended December 31, 2019 Quarter Sales Budget 6 Budgeted Unit Sales (units/pairs) Selling PricePerUnit (S) Total Budgeted Sales 65000 $12 $780.000 103200 $12 1238400 30000 $12 $360,000 54000 $12 $648,000 Year 252000 $12 $3,026,400 COST: $5/8 325000516000 150000 270000 $1,261,000 Quarter 2 Year 12 Schedule of Expected Collections 3rd 2019 4th 2019 14 3rd quarter sales, 2019 86400 259200 15 4th quarter sales, 2019 96000 16 First Quarter Sales, 2020 17 Second Quarter Sales 18 Third Quarter Sales 19 Fourth Quarter Sales 20 Total Cash Collections 355200 $86,400 $288,000 $156,000 $96,000 $468,000 $247,680 $156,000 $ 743,040 $72,000 $247,680 $216,000 $129,600 $593,280 Remainder of money to collect, carried ove $72,000 to 1st 2021 $388,800 to 1st Q: $129,600 to 2nd Q $530,400 $811,680 $971.040 $2,906,400 21 Quarter 23 Merchandise Purchases Budget 24 25 Budgeted Unit Sales 26 Add: Desired Ending Merchandise Inventory 27 Total Needs 28 Less: Beginning Merchandise Inventory 29 Required Merchandise Purchases units units 30 cost per Unit 31 Required Cost of Merchandise Purchases dollars 40000 32500 72500 $20,000 52500 65000 51600 116600 32500 84100 $5.00 $420.500 1st60% 103200 15000 118200 51600 66600 $5.00 $333,000 30000 27000 57000 15000 42000 $5.00 $210.000 54000 29000 83000 27000 56000 $5.00 $280.000 Year 252200 29000 281200 32500 84100 $5.00 $1.243.500 $5 $262,500 40% Sheet Ready esc BIU Add: Desired Ending Merchandise Inventory Total Needs Less: Beginning Merchandise Inventory Required Merchandise Purchases units units Cost per Unit Required Cost of Merchandise Purchases dollars 32500 51600 72500 116600 $20,000 32500 52500 84100 $5 $5.00 $262,500 y $420,500 40% 1st60% 105000 $157,500 15000 118200 51600 66600 $5.00 $333,000 27000 57000 15000 42000 $5.00 $210,000 29000 83000 27000 56000 $5.00 $280,000 29000 281200 32500 84100 $5.00 $1,243,500 Quarter Year 31500 33640 Schedule of Cash Disbursements - Merchnadise 4th 2019 4th quarter purchases, 2019 beg. A/P 21000 1st Quarter Purchases, 2020 2nd Quarter Purchases 3rd Quarter Purchases 4th Quarter Purchases Total Disbursements for Materials in units cost per unit to purchase 50460 26640 39960 16800 65140 25200 22400 47600 $5 77100 56760 $5 $5 $5 $5 -Total Cash Disbursements for Materials in dolars $325,700 $385,500 $283,800 $238.000 $1,233,000 33 on 0 Selling and Administrative Expense Budget Quarter Year Sheet1 Ready