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 companys 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 anxious to make a favourable impression on the president and have assembled the information below.

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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 anxious 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 forecasted sales in units are as follows January (actual) February (actual) March (actual) 26,000 June 38,000 July 51,000 August 77,000 September 111,000 62,000 42,000 40,000 37,000 ril The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next 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 days. 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 The company's monthly selling and administrative expenses are given below: Variable Sales commissions 4% of sales Fixed Advertising Rent Wages and salaries Utilities Insurance Depreciation $236,000 24,000 120,400 11.800 5.400 26,000 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 $20,800 in new equipment during May and S52,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $17,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: Assets Cash Accounts receivable ($38,000 February sales $86,000 446,000 123,200 37,800 1,010,000 $408,000 March sales) Inventory repaid insurance Fixed assets, net of depreciation Total assets $1,703,000