MASTER BUDGET 0 Saved Help Saveuxh Submit 100 polnts eBook Print Refere nces Mc Graw Hill Check my work A 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) 25,599 June 61,900 February (actual) 37,999 July 41,900 March (actual) 50,099 August 39,900 April 76,899 September 36,900 May 110.899 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% ofthe 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 monthrend. 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: Brent 1 of 1 5 Next MASTER BUDGET 0 Saved Help Saveuxh Submit Check my work The company's monthly selling and administrative expenses are given below: ' Variable: Sales commissions 4% of sales 100 Fixed: palms Advertising $233,806 Rent 23, 509 Wages and salaries 119,208 B k Utilities 11,409 E on Insurance 5,209 Depreciation 25,806 Print References 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 $20,400 in new equipment during May and $51,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $17,200 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: Assets Cash $ 55,860 Accounts receivable ($37,699 February sales; $488,068 March sales] 437,860 Inventory 121,6w Prepaid insurance 36,460 Fixed assets, net of depreciation 1,605,860 Total assets $1,635,660 Liabilities and Shareholders' Equity Accounts payable 5 129,330 Dividends payable 17,260 v Mc Graw Bray 1 of 1 Next Hill MASTER BUDGET 0 Saved Help Savesem 5...me 1 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 $20,400 in new equipment during May and $51,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $17,200 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: 100 points. Assets Cash $ 35,869 Accounts receivable ($37,096 February sales; eBook $486,998 March sales) 437mm Inventory 121,6m Prepaid insurance 36,460 an Fixed assets, net: of depreciation 1,685,8m References Total assets $1,685,860 Liabilities and Shareholders' Equity Accounts payable $ 128,3m Dividends payable 17,260 Common shares 91a,ooo Retained earnings 637mm Total liabilities and shareholdersJ equity 51,5553399 The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning ofthe month. with any repayments made at the end ofthe month. The interest rate on these loans is 1% per month and must be paid atthe end of each month based on the outstanding loan balance for that month. Required: 1. Prepare a master budget for the threeimonth period ending June 30. Include the following detailed budgets: MC rlalw Brett 1 of 1 ... Next . MASTER BUDGET i Saved Help Save & Exit Submit Check my work 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. 100 points Sales budget April May June Quarter Budgeted sales in units 76,000 110,000 61.000 247,000 10 $ 10 $ 10 eBook Selling price per unit $ 10 Total sales $ 760,000 $ 1, 100,000 $ 610,000 $ 2,470,000 Print References 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 February sales $ 37,000 $ 37,000 March sales 350,000 50,000 400,000 April sales 152,000 532,000 76,000 760,000 Mc Graw HillMASTER BUDGET i Saved Help Save & Exit Submit Check my work -1 . . - ;- - - 100 points b. A schedule of expected cash collections from sales, by month and in total. eBook Print KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections References April May June Quarter February sales $ 37,000 $ 37,000 March sales 350,000 50,000 400,000 April sales 152,000 532,000 76,000 760,000 May sales 220,000 770,000 990,000 June sales 122,000 122,000 Total cash collections $ 539,000 $ 802,000 $ 968,000 $ 2,309,000 Mc Graw HillMASTER BUDGET i Saved Help Save & Exit Submit Check my work 100 points c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. eBook KNOCKOFFS UNLIMITED Print Merchandise Purchases Budget April May June Quarter References Budgeted sales in units 76,000 110,000 61,000 247,000 Add: Budgeted ending inventory 14,000 24.400 16,400 16,400 Total needs 120,000 134,400 77,400 263,400 Less: Beginning inventory 30,400 44,000 24,400 30,400 Required unit purchases 89.600 90,400 53,000 233,000 Unit cost $ 4 $ 4 $ Required dollar purchases $ 358,400 $ 361,600 $ 212,000 $ 932,000 Mc Graw Hill100 points eBook Print d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. References KNOCKOFFS UNLIMITED Schedule of Expected Cash Disbursements April May June Quarter March purchases $ 120,800 $ 120,800 April purchases 179,200 179,200 358,400 May purchases 180,800 180,80 361,600 June purchases 106,000 106,000 Total cash disbursements $ 300,000 360,000 $ 286,800 $ 946,800Check my work 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. Do not leave any empty spaces; input a 0 wherever it is required.) 100 KNOCKOFFS UNLIMITED points Cash Budget For the Three Months Ending June 30 eBook April May June Quarter Cash balance, beginning $ 85,000 $ 50,000 60,000 $ 85,000 Print Add receipts from customers 539,000 802,000 968,000 2,309,000 References Total cash available 624,000 852,000 1,018,000 2,394,000 Less disbursements Purchase of inventory 800,000 360,000 286,800 946,800 Advertising 233,000 233,000 233,000 699,000 Rent 23,500 23,500 23,500 70,500 Salaries and wages 119,200 119,200 119,200 357,600 Sales commissions 30,400 14.000 24,400 98,800 Utilities 11,400 11,400 11,400 34,200 Dividends paid 17,200 17,200 Equipment purchases 20,400 51.000 71,400 Total disbursements 734,700 811,500 749,300 2,295,500 Excess (deficiency) of receipts over disbursements (110,700) 40,500 268,700 98,500 Mc Graw HillMASTER BUDGET i Saved Help Save & Exit Submit Check my work April May June Quarter Cash balance, beginning $ 85,000 $ 50,000 $ 50,000 $ 35,000 Add receipts from customers 539,000 802,000 968,000 2,309,000 100 Total cash available 624,000 852,000 1,018,000 2,394,000 points Less disbursements: Purchase of inventory 300,000 360,000 286,800 946,800 eBook Advertising 233,000 233,000 233,000 699,000 Rent 23,500 23,500 23,500 70,500 Print Salaries and wages 119,200 119,200 119,200 357,600 References Sales commissions 30,400 14,000 24,400 98,800 Utilities 11,400 11,400 11,400 34,200 Dividends paid 17,200 17,200 Equipment purchases 20,400 51,000 71,400 Total disbursements 734,700 811,500 749,300 2,295,500 Excess (deficiency) of receipts over disbursements 110,700) 10,500 268,700 98,500 Financing: Borrowings 162,323 Repayments Interest Total financing 162,323 0 0 Cash balance, ending 51,623 $ 40,500 $ 268,700 $ 98,500 Mc Graw HillMASTER BUDGET Saved Help Save & Exit Submit Check my work 3. A budgeted income statement for the three-month period ending June 30. Use the variable costing approach. KNOCKOFFS UNLIMITED 100 Budgeted Income Statement points For the Three Months Ended June 30 Sales revenue $ 2,470,000 eBook Variable expenses: Cost of goods sold Print Commissions 0 References Contribution margin 2,470,000 Fixed expenses: Advertising Rent Wages and salaries Utilities Insurance Depreciation 0 Operating income 2,470,000 I acc interact avnance Mc Graw HillCheck my work Budgeted Income Statement For the Three Months Ended June 30 Sales revenue $ 2,470,000 Variable expenses: 100 points Cost of goods sold Commissions Contribution margin 2,470,000 eBook Fixed expenses: Print Advertising References Rent Wages and salaries Utilities Insurance Depreciation 0 Operating income 2,470,000 Less interest expense Net income $ 2,470,000 Mc 1 of 1 Graw HillCheck my work 4. A budgeted balance sheet as of June 30. KNOCKOFFS UNLIMITED 100 Budgeted Balance Sheet points June 30 Assets eBook Cash Accounts receivable Print Inventory References Fixed assets, net of depreciation Prepaid insurance Total assets $ Liabilities and Shareholders' Equity Accounts payable, purchases Dividends payable Common shares Retained earnings Mc Graw HillMASTER BUDGET i Saved Help Save & Exit Submit Check my work KNOCKOFFS UNLIMITED Budgeted Balance Sheet June 30 100 Assets points Cash Accounts receivable eBook Inventory Print Fixed assets, net of depreciation References Prepaid insurance Total assets $ 0 Liabilities and Shareholders' Equity Accounts payable, purchases Dividends payable Common shares Retained earnings Total liabilities and shareholders' equity $ 0 Mc Graw Hill