Master Budget with Supporting Schedules

You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributer of

a designer$$s silk ties. The company has an extensive franchise in the distribution of the ties, and sales

have grown so rapidly over the last few years that it has become necessary to add new members to the

management team. 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 $1$st$.$ You are anxious to

make favorable impression on the president and have assembled the information below.

The company desires to maintain a minimum ending cash balance each month of $$10,000.$ The ties are

sold to retailers for $$9\mathrm{.}00$ each. Recent and forecasted sales in units are as follows:

January Actual $20,000$

February Actual $24,000$

March Actual $28,000$

April $35,000$

May $42,500$

June $60,000$

July $40,000$

August $35,000$

September $30,000$

October $30,000$

The large buildup in sales before and during June is due to Father$$s Day. Ending inventories are

supposed to equal $90\%$ of the next month$$s sales in units. The ties cost the company $$5$ each.

Purchases are paid for as follows: $55\%$ in the month of purchase and the remaining $45\%$ in the following

month.

All sales are on credit, with no discount, and payable within $15$ days. The company has found, however,

that only $30\%$ of a month$$s sales are collected by month$-$end. An additional $50\%$ is collected in the

following month, and the remaining $20\%$ 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 $$1\mathrm{.}00$ for each unit $($tie$)$ sold

Fixed:

Wages and Salaries $$30,000$

Utilities $$14,000$

Insurance $ $1,200$

Depreciation $ $1,500$

Miscellaneous $ $4,000$

All selling and administrative expenses are paid during the month, in cash, with the exception of

depreciation and insurance expired. New fixtures will be purchased during May for $$52,000$ cash. The

company declares dividends of $$15,000$ per quarter, payable in the first month following quarter end. The

company follows calendar quarters.

The company has an agreement with a bank that allows it to borrow in increments of $$1,000$ at the

beginning of each month, up to a total loan balance of $$150,000.$ The interest rate on these loans is $12\%$

per annum, and for simplicity, we will assume that interest is not compounded. On the last day of each

calendar quarter, the company must pay the bank all of the accumulated interest on the loan and as

much of the loan as possible $($in increments of $$1,000),$ while still retaining at least $$10,000$ in cash.

The company$$s balance sheet at March $31$st is shown below:

Assets

Cash.........................................................................................................$$14,100$

Accounts receivable......................................................................................$\mathrm{.}219,600$

Inventory..................................................................................................$\mathrm{.}157,500$

Prepaid insurance $...........................................................\mathrm{.}14,400$

Fixed assets, net of depreciation $..............................................................\mathrm{.}169,000$

Total Assets............................................................................................. $$574,600$

Liabilities and Stockholders$$ Equity

Accounts payable................................................... $.....................................$ $$77,175$

Dividends payable.........................................................................................$\mathrm{.}12,000$

Capital stock............................................................................................... $300,000$

Retained earnings......................................................................................... $185,425$

Required:

Prepare a master budget for the three$-$month period ending June $30$th$.$ Include the following detailed

budgets $/$ schedules:

$1)$ A$.$ Sales budget by Month with a total for the period.

B$.$ Schedule of expected cash collections from sales, by month and a total for the quarter.

C$.$ Merchandise purchases budget in units and in dollars. Show the budget by month and in total.

D$.$ Schedule of expected cash disbursements for merchandise purchases, by month and in total.

$2)$ A cash budget, show the budget by month and in total for the quarter.

Your master budget must be prepared in Excel. Please use a separate tab for each required budget

listed above. However, you may choose to combine requirements $1$C and $1$D into single tab within your

Excel workbook. Your submission to Canvas should be a single self$-$contained Excel workbook using

formulas and references cells between workbook tabs professionally present with formatting, correct spelling, ETC.