EXAMPLE:

Given below information of Dubai Aluminum Factory, you are asked to prepare a master

budget for April through June $($$$000)$:

Current and expected sales are:

$60\%$ of sales collected in cash during the month of sales and the other $40\%$ will be

collected next month.

Cost of goods sold is expected to be $70\%$ of sales.

Desired ending inventory will be $$20,000$ plus $80\%$ of cost of goods sold of the

following month.

$50\%$ of the purchases paid during the month and the rest the following month.

The following expenses are expected to be incurred:

Wages $$2500$ per month paid $50\%$ during the month and the rest following month.

Sales commissions $15\%$ of sales paid $50\%$ during the month and $50\%$ next month.

Rent $$2000$ monthly paid.

Promotion $5\%$ of sales paid monthly.

Insurance and depreciation are $$200$ and $$500$ respectively.

A machine with a cost of $$3000$ will be acquired and paid in April.

Minimum cash balance is required to be $$10,000$ every month.

The company will borrow in multiples of thousands when is necessary and return

when possible. The total interest expense $(1\%$ per month$)$ for the quarter is $$410,$ paid

$$140,$$$140,$ and $$130$ in April, May, and June respectively.

The balance sheet as at the end of March is as follows: