Hats-Off Limited, a na0on-wide distributor of branded baseball caps, has an exclusive franchise for the distribu0on of the caps. Sales for Hats-Off have increased rapidly over the past year and while the company is doing well its budge0ng system is struggling to keep up with the growth and poor planning has led to the company experiencing unexpected cash shortages. You have just been hired as the companys first budge0ng officer and you are eager to make a good first impression on the senior management team. Your first project is to develop a master budget for the companys third quarter (July 1 September 30). You have gathered the informa0on below. The baseball caps are sold to retailers for $15 each. Actual unit sales for the second quarter and budgeted unit sales for the third quarter plus October are as follows: Units May (actual) 100,000 June (actual) 120,000 July (budgeted) 125,000 August (budgeted) 130,000 September (budgeted) 120,000 October (budgeted) 140,000 Ending inventories should be equal to 25% of the following months sales. The baseball caps cost the company $8 each. Purchases from the supplier are paid as follows: 60% in month of purchase 40% in month following purchase All sales to retailers are made on account with no discounts offered and cash receipts from customers as follows: 25% collected in the month of sale 65% collected in the month following the sale 10% collected in the second month following the sale As the sales are made to established retailers, there are no bad debts. The companys monthly selling and administra0ve expenses are as follows: Variable: Sales commissions 5% of sales Fixed: Adver0sing $450,000 Rent 20,000 Salaries and wages 185,000 Power and heat 34,000 Insurance 4,000 Deprecia0on 20,000 All selling and administra0ve expenses are paid in the month they are incurred except for rent which is paid every six months in February and August. Deprecia0on is a non-cash expense and includes deprecia0on on the new equipment. The company plans to purchase new equipment cos0ng $80,000 in September. The company declared a $50,000 dividend in June that is payable in July. The following is the companys balance sheet at June 30: ASSETS Cash $ 100,000 Accounts receivable (from May & June sales) 1,500,000 Inventory 250,000 Prepaid rent 20,000 Fixed assets (net of deprecia0on) 860,000 TOTAL ASSETS $2,730,000 LIABILITIES & SHAREHOLDERS EQUITY Accounts payable $ 388,000 Dividends payable 50,000 Common shares 940,000 Retained earnings 1,352,000 TOTAL LIABILITIES & SHAREHOLDERS EQUITY $2,730,000 The company is required to maintain a minimum cash balance of $100,000 at the end of each month. All borrowing on the companys line of credit is done at the beginning of each month and repayments are made at the end of the month and borrowing must be done in increments of $1,000. The interest rate on the line of credit is 1% per month and must be paid at the end of each month based on the loan outstanding for that month. Required: 1. Prepare a master budget for the three-month period ending September 30 and include the following schedules: a. A sales budget by month and in total. b. A schedule of cash collec0ons from sales by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases by month and in total. 2. A cash budget by month and in total for the three-month period ending September 30. 3. A budgeted income statement for the three-month period ending September 30. Use the contribu0on format. 4. A budgeted balance sheet as at September 30