Case 9-29 Master Budget with Supporting Schedules

Case 9-29 Master Budget with Supporting Schedules [LO9-2, LO9-4, LO9-8, LO9-9, LO9-10] You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer's silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few y that it has become necessary to add new members ears to the management team. 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 anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $10,000. The ties are sold to retailers for $8 each. Recent and forecasted sales in units are as follows 65,000 January (actual) 22.000 June February (actual) 27,000 July 41.000 March (actual) 43,000 30,000 August Apr 38,000 September 41.000 May 47.000 The large buildup in sales before and during June is due to Father's Day. Ending inventories are supposed to equal 90% of the next month's sales in units. The ties cost the company $5 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 25% of a month's sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following sale. Bad debts have been negligible The company's monthly selling and administrative expenses are given below. Variable Sales commissions 1 per tie Fixed: Wages and salaries 31,200 21,500 Utilities Insurance 1 400 Depreciation 1,600 Miscellaneous 3,100