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 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)	23,500	June	57,000
February (actual)	33,000	July	37,000
March (actual)	46,000	August	35,000
April	72,000	September	32,000
May	106,000

The large buildup in sales before and during May is due to Mothers Day. Ending inventories should be equal to 40% of the next months 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 months 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 companys monthly selling and administrative expenses are given below:

Variable:
Sales commissions		4	% of sales
Fixed:
Advertising	$	221,000
Rent		21,500
Wages and salaries		114,400
Utilities		9,800
Insurance		4,400
Depreciation		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 cash. The company declares dividends of $16,400 each quarter, payable in the first month of the following quarter. The companys balance sheet at March 31 is given below:

Assets
Cash	$	81,000
Accounts receivable ($33,000 February sales; $368,000 March sales)		401,000
Inventory		115,200
Prepaid insurance		30,800
Fixed assets, net of depreciation		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 Seling price per unit Total sales May 106,000 April June Quarter 72,000 57,000 506,000 10 S 10 S $ 720,000 $ 1,060,000 $ 570,000 $ 5,060,000 10 S b. A schedule of expected cash collections from sales, by month and in total KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April May June Quarter 33,000 46,000 72,000 33,000 February sales March sales April sales May sales June sales Total cash collections$ 46,000 72,000 33,000 $ 46,000 $ 72,000 151,000 c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total KNOCKOFFS UNLIMITED Merchandise Purchases Budget April May June Quarter 72,000 235,000 Budgeted sales in units Add: Budgeted ending inventory Total needs Less: Beginning inventory Required unit purchases Unit cos Required dollar purchases 106,000 57,000 72,000 106,000 57,000 235,000 72,000 106,000 57,000 235,000 0 S d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. KNOCKOFFS UNLIMITED Schedule of Expected Cash Disbursements April May June Quarter March purchases April purchases May purchases June purchases Total cash disbursements$ 0 S 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 you whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign. Do not leave any empty spaces; input a 0 wherever it is required.) r interest calculations to the next KNOCKOFFS UNLIMITED Cash Budget For the Three Months Ending June 30 April May June Quarter Cash balance, beginning Add receipts from customers Total cash available Less disbursements: Purchase of inventory Rent Salaries and wages Sales commissions Utilities Dividends paid Equipment purchases Total disbursements Excess (deficiency) of receipts over disbursements Financing Interest Total financing Cash balance, ending approach. KNOCKOFFS UNLIMITED Budgeted Income Statement For the Three Months Ended June 30 expenses 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