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 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 $$30,000.$ The price per unit

is $$100.$ Recent and forecasted sales units $($Bicycles$)$ are as follows:

The large buildup in sales before and during June is due to Father's Day. Ending inventories are

supposed to equal $20\%$ of the next month's sales. The cost of sales is expected to be $40\%$ of the

monthly sales.

Purchases are paid for as follows: $50\%$ in the month of purchase and the remaining $50\%$ in the

following month. The company has found, however, that $70\%$ of a month's sales are collected by

month$-$end. An additional $30\%$ is collected in the following month.

The company's monthly operating expenses are given below:

Variable: Sales commissions $10\%$ of sales

Fixed: Wages and salaries $$200,000$

Utilities $,60,000$

Insurance $,30,000$

Depreciation $,10,000$

All operating expenses are paid during the month, in cash, with the exception of depreciation

and insurance expired. The company's balance sheet at March $31$ is given below:

The company has an agreement with a bank that allows the company to borrow in increments of

$$1,000$ at the beginning of each month, up to meet the needs. 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 $$1,000),$ while still retaining at least $$5,000$ in cash.

Required:

Prepare a master budget for the three$-$month period ending June $30($all necessary schedules$).$

Include the following detailed budgets:

A sales budget

A purchase budget.

A cash budget

A budgeted income statement

A budgeted balance sheet