Directions: Each team will be responsible for completing the case detailed at the end of these instructions. The project needs to be done in Excel. Each team will submit the finished product via e-mail as an attachment by midnight on the due date. There is an Excel template on my website that you can use to complete the project. It will save you loads of time. The project due date is noted on your class timeline. Note: You need to use formulas and cell references whenever possible. If you do not use formulas or cell references, I will deduct points. Part 1a. This part requires you to create a sales budget by month and the total for the 2nd quarter. Use formulas wherever possible. Part 1b. This part requires you to create a schedule for budgeted cash collections from sales and accounts receivable. Use formulas wherever possible and link information from Part 1a. Part 1c. This part requires you to create a purchases budget in units and dollars. Note: this company is a merchandiser, so no production budget is needed. Instead, a purchases budget will be used (since the company will be buying inventory instead of manufacturing it). Obviously, you will not need any direct materials, direct labor etc. budgets. Use formulas wherever possible. Link information wherever possible. Part 1d. This part requires you to create a cash disbursements budget for purchases by month and the total for the quarter. Use formulas wherever possible and link information. Part 2. This part requires you to create a cash budget by month and the total for the quarter. Use formulas wherever possible and link information. Also use formulas when you calculate numbers that arent given, like interest expense. Use formulas whenever you calculate numbers (i.e. interest expense). Part 3. This part requires you to create a budgeted income statement from the previous parts and additional information given in the case. Use formulas wherever possible, including any derived numbers (i.e. COGS, commissions). Use formulas whenever you calculate numbers. Part 4. This part requires you to create a budgeted balance sheet from the previous parts and additional information given in the case. Use formulas wherever possible, including any derived numbers (i.e. unexpired insurance, fixed assets, net of depreciation, retained earnings, dividends payable, inventory). Use formulas whenever you calculate numbers. Master Budget with Supporting Schedules You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designers silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few years that it has become necessary to add new members 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 $12,000. The ties are sold to retailers for $8.10 each. Recent and forecasted sales in units are as follows: January (actual) 20,000 June 65,000 February (actual) 24,000 July 40,000 March (actual) 28,000 August 36,000 April 33,000 September 32,000 May 41,000 ________________________________________ The large buildup in sales before and during June is due to Fathers Day. Ending inventories are supposed to equal 75% of the next months sales in units. The ties cost the company $4.85 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 30% of a months sales are collected by month-end. An additional 60% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The companys monthly selling and administrative expenses are given below: Variable: Sales commissions $ 1 per tie Fixed: Wages and salaries $ 22,000 Utilities $ 14,000 Insurance $ 1,200 Depreciation $ 1,500 Miscellaneous $ 3,000 ________________________________________ All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $30,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The companys balance sheet at March 31 is given below: Assets Cash $ 14,000 Accounts receivable ($19,440 February sales; $158,760 March sales) 178,200 Inventory (24,750 units) 120,037.50 Prepaid insurance 14,400 Fixed assets, net of depreciation 172,700 ________________________________________ ________________________________________ Total assets $ 499,337.50 ________________________________________________________________________________ ________________________________________________________________________________ Liabilities and Stockholders Equity Accounts payable $ 76,993.75 Dividends payable 12,000 Capital stock 300,000 Retained earnings 110,343.75 ________________________________________ ________________________________________ Total liabilities and stockholders equity $ 499,337.50 ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________ The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $300,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $12,000 in cash.