Master Budget with Supporting Schedules

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 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:

\fVariable: Sales commissions . . . 4% of sales Fixed: Advertising. . . . . $200,000 Rent . . . . 18,000 Wages and salaries. . 106,000 Utilities. . .... 7,000 Insurance . . . 3,000 Depreciation. ... 14,000Assets Cash .. .. . . $ 74,000 Accounts receivable ($26,000 February sales; $320,000 March sales) . . . . . 346,000 Inventory . . . . . . . 104,000 Prepaid insurance. . 21,000 Fixed assets, net of depreciation 950,000 Total assets. . . . . $1,495,000 Liabilities and Shareholders' Equity Accounts payable . . . . . . $ 100,000 Dividends payable . . .... 15,000 Common shares . .. 800,000 Retained earnings. . ... . 580,000 Total liabilities and shareholders' equity . . . . $1,495,000