Knockoffs Unlimited, a nationwide distributor of low cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. 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 eager to make a favourable impression on the president and have assembled the information below. The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows: January (actual) February (actual) March (actual) April May 27,000 40.000 53,000 79,000 113,000 June July August September 64,000 44.000 42,000 39.000 Mother's Day. Ending inventories should be equal to 40% of the next The large buildup in sales before and during May is due month's sales in units The necklaces cost the company $4 each Purchases are paid for as follows 50% in the month of purchase and the remaining 50% in the following month All sales are on credit with no discount and payable within 15 dagle The company has found, however, that only 20% of a month's sales are collected by month-end. 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 4X of sales Variable: Sales commissions Fixed: Advertising Rent Wages and salaries Utilities Insurance Depreciation $242,000 25,000 122,800 12,600 5,800 28,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance Insurance is paid on an annual basis, in November of each year. The company plans to purchase $21,600 in new equipment during May and $54,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $17.800 each quarter payable in the first month of the following quarter. The company's balance sheet at March 31 is given below 38.000 454,000 126,400 40,600 1,020,000 51,739,000 Assets Cash Accounts receivable ($40,000 February sales; $424,000 March sales) Inventory Prepaid insurance Fixed assets, net of depreciation Total assets Liabilities and Shareholders' Equity Accounts payable Dividends payable Common shares Retained earnings Total liabilities and shareholders' equity 5 126,800 17.30 940,000 654,400 $1,739,000 The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month with any repayments made at the end of the month. The interest rate on these loans is 1% per month and must be paid at the end of each month based on the outstanding loan balance for that month Required: 1. Prepare a master budget for the three month period ending June 30, include the following detailed budgets a. A sales budget by month and in total Sains budget Budgeted sales in units Selling price per un Total sales April 79.000 $ 105 $790.000 $ May 113 000 10 1,136.000 54000 105 540,000 $ 255.000 10 2.560.000 b. A schedule of expected cash collections from sales, by month and in total KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April 10.0001 45.000 February salos 111 NE t7 Savod b. A schedule of expected cash collections from sales, by month and in total. February sales March sales April sales May sales June sales Total cash collections KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April May $ 40,000 371,000 53,000 158,000 553,000 226,000 June Quarter 40,000 424,000 79,000 790,000 791,000 1,017.000 128,000 128,000 998,000 $2,399.000 $ 569,000 $ 832,000 $ c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total KNOCKOFFS UNLIMITED Merchandise Purchases Budget April 79,000 113,000 45.200 25,600 May June 64,000 17,600 Quarter 256,000 17,600 Budgeted sales in units BE Next WOCHETS LIMITED Budgeted sales in unit 64.00 17 Total needs 79.000 45.200 124.200 31600 32.600 411 370.400 May 113.000 25.600 138.600 15.200 3.400 48 373.600 250.000 17.00 2760 3160 242.000 4 OD 2500 6 000 45 224 000 Required unit purchase Unit cost Required dollar purchases 5 d. A schedule of expected cash disbursements for merchandise purchases, by month Adin total KNOCKOFFS UNLIMITED Schedule of Expected Cash Disboa Mwy 3 126 300 105 200 1862001 Our $ 2600 30 000 March purchases Apel purchases HOROFFSUNLIMITED Schedule of Cards A May 5 126.000 105 2001 185.200 185.000 March purchases Aprill purchases May purchases June purchases Total cash disbursements $ 105 800 112,000 290.000 126.800 370,400 373.60 112.000 902.00 5 312.0005 372.000 5 2. A cash budget Show the budget by month and in total (Round your intermediate calculations and into answers to the nearest whole dollar. Also, round down your interest calculations to the next whole dollar amount Coun deficiency, repayments and Interest should be indicated by a minus sign. Do not leave any empty spaces: input wherever it is required) KNOCKOFFS UNLIMITED Cast Budget For the Three Months Ending Jue 10 May 5 8.000 5 50.000 5 569 000 032.000 Quit so boots 000 950.000 3299 000 Cash balance beginning Add receipts from customers June Quarter 50,000 $ 88,000 998,000 2,399,000 1,048,000 2,487,000 Cash Budget For the Three Months Ending June 30 April Cash balance, beginning May $ 88,000 $ 50,000 $ Add receipts from customers 569,000 832,000 Total cash available 657,000 882,000 Less disbursements: Purchase of inventory 312,000 372,000 Advertising 242,000 242,000 Rent 25,000 25,000 Salaries and wages 122 800 122,800 Sales commissions 31,600 45,200 Utilities 12,600 12,600 Dividends paid 17,800 21,600 Equipment purchases Total disbursements 763.800 841.200 (106,800) 40 800 Excess (deficiency) of receipts over disbursements Financing 158,384 10,893 Borrowings Repayments (1,584) (1.693) Interest 156,800 9,200 Total financing 50.000 $ 50.000 $ Cash balance, endina 298,800 242,000 25,000 122,800 25,600 12,600 982.800 726,000 75,000 368,400 102.400 37,800 17,800 75 600 2385,800 101,200 54,000 780.800 +267.200 (169.277) (1.693) (170,970) 96 2305 169 277 (169.277) (4.969) (4.969) 96 231 $ Prey 1 of Next i Saved $ 2,560,000 KNOCKOFFS UNLIMITED Budgeted Income Statement For the Three Months Ended June 30 Sales revenue Variable expenses Cost of goods sold $ 1,024,000 Commissions 102,400 Contribution margin Fixed expenses Sales revenue Utilities Insurance Advertising Rent Depreciation 1,126 400 1,433,600 0 1,433,600 Operating income $ 1,433,600 Net income Prey 1 of 1 - 7i Save 4. A budgeted balance sheet as of June 30. KNOCKOFFS UNLIMITED Budgeted Balance Sheet June 30 Assets Total assets Liabilities and Shareholders' Equity Total liabilities and shareholders' equity Prey O cz earch