Hats-Off Limited, a nation-wide distributor of branded baseball caps, has an exclusive franchise for the distribution of the caps. Sales for Hats-Off have increased rapidly over the past year and while the company is doing well its budgeting 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 company's first budgeting 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 company's third quarter (July 1-September 30). You have gathered the information 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: May (actual) June (actual) July (budgeted) August (budgeted) September (budgeted) October (budgeted) Units 100,000 120,000 125,000 130,000 120,000 140,000 Ending inventories should be equal to 25% of the following month's 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 company's monthly selling and administrative expenses are as follows:

All selling and administrative expenses are paid in the month they are incurred except for rent which is paid every six months in February and August. Depreciation is a non-cash expense and includes depreciation on the new equipment. The company plans to purchase new equipment costing $80,000 in September. The company declared a $50,000 dividend in June that is payable in July. The following is the company's balance sheet at June 30 : The company is required to maintain a minimum cash balance of $100,000 at the end of each month. All borrowing on the company's 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 collections 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 contribution format. 4. A budgeted balance sheet as at September 30