Create a sales budget

Razia buys beaded necklaces from aboriginal women in Thunder Bay. She then sells them at craft fairs throughout Canada. Her balance sheet as of the end of May, 2021 is as follows:

                        Cash                            $ 3,200

                        A/R                                 8,928

                        Inventory                        6,250

                        Equipment (net)          124,600

                        A/P                                 $7,350

                        Loan Payable                   8,000

                        Common Shares            50,000

                        Retained Earnings          77,628

Razia wants to prepare a budget for the three months of the important selling season (June, July, and August). She has gathered the following information:

• a).The cost of each necklace is $5

• b). 40% of all sales are on account. On average, 30% of the credit sales are collected in the month of the sale, 40% the following month and 20% the month after. As indicated by the collection history, the firm experiences an average of 10% uncollectible accounts.

• c). In August, Razia has scheduled to have a completely new engine installed in the mobile home that she uses to travel between fairs. She has this done every three years. It will cost $20,000.

• d). Sales for April were $21,600. Sales for June were $30,000.

• e). In April, 2,100 units were purchased.

• f). The selling price of the necklaces is $12 each.

• g). Repairs and maintenance on the mobile home average $7,000 per month. Depreciation on the mobile home is $80,000 per year.

• h). On average, fees at the craft shows amount to 12% of sales.

• i). On average, Razia sells 550 necklaces at each show. She plans to attend 4 shows in June, 5 shows in July, 8 in August, 4 in September, and 2 in October.

• j). Gas costs are about $400 per show.

• k). The firm has a policy of maintaining a cash balance of no less than $5,000.

• l).Razia tries to maintain inventory equal to 15% of the following month’s sales.

• m). All purchases are on account. 30% are paid in the month of the purchase and the rest in the following next month.

• n). Razia intends to repay any loans as quickly as possible. All payments are made at the end of the month. Any borrowings are made at the beginning of the month. Interest is paid at the end of each month on the balance at the beginning of the month. When cash is available, the principal on any outstanding loans is reduced. The interest rate is 6%.

• o).Razia’s tax rate is about 35%. Taxes are paid in April.