Class exercise - Master Budgeting (2 marks) 1. Caprice Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow. Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January. .Collections are expected to be 80% in the month of sale, 16% in the month following the sale, and 4% uncollectible. The cost of goods sold is 70% of sales. The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase. The November beginning balance in the accounts receivable account is $78,000. The November beginning balance in the accounts payable account is $254,000. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. 2. Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: Sales..... Production....... April May June 50,000 40,000 60,000 60,000 50,000 50,000 Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month. The accounts payable balance on March 31 totals $190,000, which will be paid in April. All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale. 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $500,000 ($90,000 from February's sales and $410,000 from March's sales). Required: a. Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation. b. Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation. 2