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) April May 23,500 June 33,000 July 46,000 August 72,000 September 106,000 57,000 37,000 35,000 32,000 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 Prax 1 of 1 AM Next Saved 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: 4% of sales Variable: Sales commissions Fixed: Advertising Rent Wages and salaries Utilities Insurance Depreciation $221,000 21,500 114,400 9,800 4,400 21.000 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 $18,800 in new equipment during May and $47.000 in new equipment during June, both purchases will be paid in ---- ---- - 4 exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $18,800 in new equipment during May and $47,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $16,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: $ 81,000 Assets Cash Accounts receivable ($33,000 February sales; $368,000 March sales) Inventory Prepaid insurance Fixed assets, net of depreciation 401,000 115,200 30,800 985,000 Total assets $1,613,000 Liabilities and Shareholders' Equity Accounts payable $ 112.800 Dividends payable 16,400 Common shares 870,000 Retained earnings 613.800 Total liabilities and shareholders' equity $1,613,000 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: Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: 1. a. A sales budget by month and in total. Sales budget Budgeted sales in units Selling price per unit Total sales April 72.000 S 10 $ 720 000 May 106,000 S 10 $ 1060.000 June 57.000 $ 10 $ 570.000 Quarter 235.000 S 10 S 2 350 000 2. A cash budget. Show the budget by month and in total. (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round down your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign.) KNOCKOFFS UNLIMITED Cash Budget For the Three Months Ending June 30 April May June Quarter 0 0 0 0 Cash balance beginning Add receipts from customers Total cash available Less disbursements Purchase of inventory Advertising Rent Salaries and wages Grey 1 of 1 HE Next education.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Flms... Tube Maps S (98) Dila Himmat K... HubSpot - Academy Saved 0 0 0 0 Add receipts from customers Total cash available Less disbursements: Purchase of inventory Advertising Rent Salaries and wages Sales commissions Utilities Dividends paid Equipment purchases Total disbursements Excess (deficiency) of receipts over disbursements Financing Borrowings Repayments Interest Total financing Cash balance ending 0 0 0 0 0 0 0 0 0 0 0 10 0 0 re Wex to search Maps (98) Dila Himmat K... A%252F%252F HubSpot - Academy Saved 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 Sales revenue Variable expenses Cost of goods sold Commissions Contribution margin Fixed expenses 0 0 Prev 1 of 1 Need Saved Sales revenue Variable expenses Cost of goods sold Commissions Contribution margin Fixed expenses 0 0 es 0 0 0 Prey 1 of 1 VULNUTTO UNLIMITE Budgeted Balance Sheet June 30 Assets Cash Accounts receivable Inventory (Prepaid insurance Fixed assets, net of depreciation ces 0 Total assets Liabilities and Shareholders' Equity Accounts payable, purchases Dividends payable Rent Total liabilities and stockholders equity 0