Chicken Company, a supplies store of specialty office items who prepares its master budget on a quarterly basis.Mike Milac, the production manager, approached Pamela William, the controller.He told her that he was currently struggling with finances at home due to a recent renovation.He reminded her that 80% of his bonus was directly tied to the performance of the company compared with budget.He hinted that it would be beneficial if she was able to ensure that in 2020 he exceed budgeted expectations.

Pamela William, the controller, is in charge of preparing the master budget.It is a participative budget where she receives input from all levels.

Actual sales for December and budgeted sales for the next four months are as follows: December (actual) ... $280,000 January .. . ... $400,000 February . .. . $600,000 March . ... $300,000 April . .... $200,000January February March Quarter Budgeted costs of goods sold $240,000 $360,000 $180,000 $780,000 Add: Desired Ending Inventory $90,000 $45,000 $30,000 $30,000 Total Needs $330,000 $405,000 $210,000 $810,000 Less: Beginning Inventory $60,000 $90,000 $45,000 $60,000 Required Purchases $270,000 $315,000 $165,000 $750,000January February March Quarter December Purchases $93,000 $93,000 January Purchases $135,000 $135,000 $270,000 February Purchases $157,500 $157,500 $315,000 March Purchases $82,500 $82,500 Total cash disbursements for purchases $228,000 $292,500 $240,000 $760,500January February March Quarter Beginning cash balance $48,000 $30,000 $30,800 $48,000 Add: Cash Collection $304,000 $440,000 $540,000 $1,284,000 Total Cash Available $352,000 $470,000 $570,800 $1,332,000 Less: Disbursements Purchases of Inventory $228,000 $292,500 $240,000 $760,500 Selling and Administrative Expenses $129,000 $145,000 $121,000 $395,000 Purchases of Equipment $1,700 $84,500 $86,200 Cash Dividends $45,000 $45,000 Total Cash Disbursements $402,000 $439,000 $445,500 $1,286,700 Excess (deficiency) of cash ($50,000) $30,800 $125,300 $45,300 Financing: Borrowing $80,000 $80,000 Repayments ($80,000) ($80,000) Interests ($2,400) ($2,400) Total Effect $80,000 ($82,400) ($2,400) Cash Balance, Ending $30,000 $30,800) $42,900 $42,900Income Statement for the Quarter Ending March 31 Chicken Company Sales $1,300,000 Less: Cost of Goods Sold Beginning Inventory $60,000 Add: Purchases $750,000 Goods Available for Sale $810,000 Ending Inventory $30,000 $780,000 Gross Margin $520,000 Salaries and Wages $81,000 Advertising Expense $210,000 Depreciation Expense $42,000 Shipping Expense $65,000 Other Expenses $39,000 $437,000 Net Operating Income $83,000 Less: Interest Expense $2,400 Net Income $80,600