Hi - I need major help with this case study. Please help!

You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below.

The company sells many styles of earrings, but all are sold for the same price$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings):

January (actual)	22,400	June (budget)	52,400
February (actual)	28,400	July (budget)	32,400
March (actual)	42,400	August (budget)	30,400
April (budget)	67,400	September (budget)	27,400
May (budget)	102,400

The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $5.20 for a pair of earrings. One-half of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month's sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Variable:
Sales commissions	4	% of sales
Fixed:
Advertising	$ 320,000
Rent	$ 30,000
Salaries	$ 130,000
Utilities	$ 13,000
Insurance	$ 4,200
Depreciation	$ 26,000

Insurance is paid on an annual basis, in November of each year.

The company plans to purchase $22,000 in new equipment during May and $52,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $24,000 each quarter, payable in the first month of the following quarter.

The company's balance sheet as of March 31 is given below:

Assets
Cash	$ 86,000
Accounts receivable ($45,440 February sales; $542,720 March sales)	588,160
Inventory	140,192
Prepaid insurance	27,000
Property and equipment (net)	1,070,000
Total assets	$ 1,911,352
Liabilities and Stockholders' Equity
Accounts payable	$ 112,000
Dividends payable	24,000
Common stock	1,040,000
Retained earnings	735,352
Total liabilities and stockholders' equity	$ 1,911,352

The company maintains a minimum cash balance of $62,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

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. 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 $62,000 in cash.

Required:

Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules:

1. a. A sales budget, by month and in total.

b. A schedule of expected cash collections, 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. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $62,000.

3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach.

4. A budgeted balance sheet as of June 30.

Complete this question by entering your answers in the tabs below.

• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a sales budget, by month and in total.

Sales Budget
	April	May	June	Quarter
Budgeted unit sales	67,400	102,400	52,400	222,200
Selling price per unit	$16	$16	$16	$16
Total sales	$1,078,400	$1,638,400	$838,400	$3,555,200

• Req 1A

Complete this question by entering your answers in the tabs below.

• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a schedule of expected cash collections, by month and in total.

Earrings Unlimited
Schedule of Expected Cash Collections
	April	May	June	Quarter
February sales	$0	0	0	$0
March sales	0	0	0	0
April sales	0	0	0	0
May sales	0	0	0	0
June sales	0	0	0	0
Total cash collections	$0	$0	$0	$0

Complete this question by entering your answers in the tabs below.

• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a merchandise purchases budget in units and in dollars. Show the budget by month and in total.(Round unit cost to 2 decimal places.)

Earrings Unlimited
Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted unit sales	67,400	102,400	52,400	222,200
Total needs	67,400	102,400	52,400	222,200
Required purchases	67,400	102,400	52,400	222,200
Unit cost	$5.20	$5.20	$5.20	$5.20
Required dollar purchases	$350,480	$532,480	$272,480	$1,155,440

Complete this question by entering your answers in the tabs below.

• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a schedule of expected cash disbursements for merchandise purchases, by month and in total.

Earrings Unlimited
Budgeted Cash Disbursements for Merchandise Purchases
	April	May	June	Quarter
Accounts payable				$0
April purchases				0
May purchases				0
June purchases				0
Total cash payments	$0	$0	$0	0

• Req 1C
• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $62,000.(Cash deficiency, repayments and interest should be indicated by a minus sign.)

Earrings Unlimited
Cash Budget
For the Three Months Ending June 30
	April	May	June	Quarter
Beginning cash balance	$86,000
Add collections from customers
Total cash available	86,000	0	0	0
Less cash disbursements:
Merchandise purchases				0
Advertising	320,000	320,000	320,000	960,000
Rent	30,000	30,000	30,000	90,000
Salaries	130,000	130,000	130,000	390,000
Commissions	43,136	65,536	33,536	142,208
Utilities	13,000	13,000	13,000	39,000
Equipment purchases	0	22,000	52,000	74,000
Dividends paid				0
Total cash disbursements	536,136	580,536	578,536	1,695,208
Excess (deficiency) of cash available over disbursements	(450,136)	(580,536)	(578,536)	(1,695,208)
Financing:
Borrowings	1,000	1,000	1,000	3,000
Repayments				0
Interest	10	20	30	60
Total financing	1,010	1,020	1,030	3,060
Ending cash balance	$(449,126)	$(579,516)	$(579,566)	$(1,698,268)

• Req 1D

• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a budgeted income statement for the three-month period ending June 30. Use the contribution approach.

Earrings Unlimited
Budgeted Income Statement
For the Three Months Ended June 30
Variable expenses:
		0
		0
Fixed expenses:
		0
		0
		0

• Req 2

Complete this question by entering your answers in the tabs below.

• Req 1A
• Req 1B
• Req 1C
• Req 1D
• Req 2
• Req 3
• Req 4

Prepare a master budget for the three-month period ending June 30 that includes a budgeted balance sheet as of June 30.

Earrings Unlimited
Budgeted Balance Sheet
June 30
Assets
Accounts receivable
Total assets	$0
Liabilities and Stockholders' Equity
Accounts payable
Total liabilities and stockholders' equity	$0