Oxford, Inc., is preparing its master budget for the quarter ended June 30. It sells a single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. At March 31, the balance in accounts receivable is $12,000, which represents the uncollected balance on March sales, Budgeted sales for the next four months follow: Apr May June July Sales in Units ...........900 1,000.00 1.200 The product cost is $20 per unit, and desired ending inventory is 60% of the following month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in the month of purchase and 50% in the following month. At March 31, the balance in accounts payable is $11,000, which represents the unpaid purchases from March. Operating expenses are paid in the month incurred and consist of: Commissions (10% of sales) Shipping (3% of sales) Office salaries ($3,000 per month) - Rent ($5,000 per month) Depreciation is $2.000 per month. Income taxes are 40%, and will be paid on July 1. There are no taxes payable at March 31. A minimum cash balance of $12,000 is required, and the beginning cash balance is $12,000. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month end. If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At March 31, the loan balance is $2,000. PART 1: Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of April, May, and June that includes the: Sales budget Schedule of cash receipts Merchandise purchases budget Schedule of cash disbursements for purchases of merchandise Schedule of cash disbursements for selling and administrative expenses (combined) - Cash budget, including information on the loan balance Budgeted income statement for the quarter Part 2: Demand for your product is much larger than expected. The amount of product sold for the quarter is acutally 50% over breakeven. The budgets you prepared above were planned prior to the beginning of the year and are valid for the planned level of sales activity. If the actual level of sales activity differs from the planned level, comparing the budgets you prepared above with actual results may lead to incorrect conclusions about performance. Therefore, we must prepare a FLEXIBLE budget that adjusts revenues and expenses given the actual level of sales activity that occurred. Set up your flexible budgets (you will need one for small and one for large milkshakes) as appears below: Planned Budget Activity Actual results Spending Flexible Budget based on and based on actual Variances based on actual budgeted sales spending actual sales actual sales variances Revenue Less: CGS Etc. Oxford, Inc., is preparing its master budget for the quarter ended June 30. It sells a single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. At March 31, the balance in accounts receivable is $12,000, which represents the uncollected balance on March sales, Budgeted sales for the next four months follow: Apr May June July Sales in Units ...........900 1,000.00 1.200 The product cost is $20 per unit, and desired ending inventory is 60% of the following month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in the month of purchase and 50% in the following month. At March 31, the balance in accounts payable is $11,000, which represents the unpaid purchases from March. Operating expenses are paid in the month incurred and consist of: Commissions (10% of sales) Shipping (3% of sales) Office salaries ($3,000 per month) - Rent ($5,000 per month) Depreciation is $2.000 per month. Income taxes are 40%, and will be paid on July 1. There are no taxes payable at March 31. A minimum cash balance of $12,000 is required, and the beginning cash balance is $12,000. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month end. If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At March 31, the loan balance is $2,000. PART 1: Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of April, May, and June that includes the: Sales budget Schedule of cash receipts Merchandise purchases budget Schedule of cash disbursements for purchases of merchandise Schedule of cash disbursements for selling and administrative expenses (combined) - Cash budget, including information on the loan balance Budgeted income statement for the quarter Part 2: Demand for your product is much larger than expected. The amount of product sold for the quarter is acutally 50% over breakeven. The budgets you prepared above were planned prior to the beginning of the year and are valid for the planned level of sales activity. If the actual level of sales activity differs from the planned level, comparing the budgets you prepared above with actual results may lead to incorrect conclusions about performance. Therefore, we must prepare a FLEXIBLE budget that adjusts revenues and expenses given the actual level of sales activity that occurred. Set up your flexible budgets (you will need one for small and one for large milkshakes) as appears below: Planned Budget Activity Actual results Spending Flexible Budget based on and based on actual Variances based on actual budgeted sales spending actual sales actual sales variances Revenue Less: CGS Etc