Knockoffs Unlimited, a nationwide distributor of lowcost 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) 23,000 June 56,000 February (actual) 32,000 July 36,000 March (actual) 45,000 August 34,000 April 71,000 September 31,000 May 105,000 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% ofa month's sales are collected by monthend. 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 $218,000 an\"; o 1 Ann Variable: Sales commissions 4 % of sales Fixed : Advertising $218, 000 Rent 21, 000 Wages and salaries 113 , 200 Utilities 9 , 400 Insurance 4, 200 Depreciation 20,000 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 $18,400 in new equipment during May and $46,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $16,200 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: Assets Cash $ 80 , 000 Accounts receivable ($32,000 February sales; $360, 000 March sales) 392 , 000 Inventory 113 , 600 Prepaid insurance 29, 400 Fixed assets, net of depreciation 980 , 000 Total assets $1, 595, 000 Liabilities and Shareholders' Equity Accounts payable $ 110 , 800 Dividends payable 16 , 200 Common shares 860, 000 Retained earnings 608, 000 Total liabilities and shareholders' equity $1 , 595, 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 ofhe company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month, ith 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 ach month based on the outstanding loan balance for that month. equired: . Prepare a master budget for the threemonth period ending June 30. Include the following detailed budgets: . A sales budget by month and in total. Budgeted sales in units 71,000 105,000 56,000 232,000 $ 10 $ 10 10 $ 1,050,000 $ 560,000 $ 2,320,000 Selling price per unit Total sales 35 710,000 $ . A schedule of expected cash collections from sales, by month and in total. February sales $ 32,000 _ _ $ 32,000 March sales 45,000 45,000 February sales March sales April sales May sales June sales Total cash collections c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. Budgeted sales in units Required unit purchases Unit cost Required dollar purchases . A schedule of expected cash disbursements for merchandise purchases, by month and in total. March purchases April purchases May purchases June purchases Total cash disbursements . A cash budget. Show the budget by month and in total. (Round your intermediate calculations and final answers to the nearest hole dollar. Also, round down your interest calculations to the next whole dollar amount. Cash deficiency, repayments and nterest should be indicated by a minus sign. Do not leave any empty spaces; input a O wherever it is required.) Add receipts from customers Sales commissions Utilities Dividends paid Equipment purchases Total disbursements 0 0 0 0 Excess (deficiency) of receipts over disbursements 0 0 0 0 Financing: Borrowings Repayments Interest Total financing 0 0 0 0 Cash balance, ending $ 0 $ 0 $ 0 $ 0 3. A budgeted income statement for the three-month period ending June 30. Use the variable costing approach. KNOCKOFFS UNLIMITED Budgeted Income Statement For the Three Months Ended June 30 Variable expenses:0 0 4. A budgeted balance sheet as of June 30. KNOCKOFFS UNLIMITED Budgeted Balance Sheet June 30 Assets. A budgeted balance sheet as of June 30. Assets Total assets I. Liabilities and Shareholders' Equity