please complete all parts
You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets located In shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same price-$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): January (actual) February (actual) March (actual) April (budget) May (budget) 23,400 29,400 43,400 68,400 103,400 June (budget) July (budget) August (budget) September (budget) 53.400 33,400 31.400 28,400 The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. Suppliers are paid $5.70 for a pair of earrings. One-half of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit. Only 20% of a month's sales are collected in the month of sale. 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. Monthly operating expenses for the company are given below. 48 of sales Variable: Sales commissions Fixed Advertising Rent Salaries $ 370,000 $ 35.000 $ 140,000 Variable Sales comissions Fixed Advertising 41 of sales Rent Salarios Utilities Insurance Depreciation $ 370,000 $ 35.000 $ 140,000 $ 15,500 $ 4.700 $ 31.000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $24,500 in new equipment during May and $57,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $27.750 each quarter, payable in the first month of the following quarter. Selected items from the company's March 31 balance sheet are as follows: 91,000 Cash Recounts receivable ($7,040 February sales 5555,520 Mareh sales) Inventory Accounts payable Dividende payable 602,560 155,952 117.000 27,750 The company maintains a minimum cash balance of $67,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow in increments of $1,000 at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible in Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections, by month and in total C. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A 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. Determine any borrowing that would be needed to maintain the minimum cash balance of $67,000. Complete this question by entering your answers in the tabs below. Required 1A Required 18 Required 1C Required 1D Required 2 Prepare a master budget for the three-month period ending June 30 that includes a sales budget, by month and in total. Sales Budget April May June Quarter Budgeted unit sales Selling price per unit Total sales Required 18 > Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 1C Required 1D Required 2 Prepare a master budget for the three-month period ending June 30 that includes a sc month and in total. Earrings Unlimited Schedule of Expected Cash Collections April May June Quarter February sales March sales April sales May sales June sales Total cash collections Required 1A Required 10 > Required 1A Required 18 Required y1cRequired 1D Required 2 Prepare a master budget for the three-month period ending June 30 that includes a merchandise pu and in dollars. Show the budget by month and in total. Earrings Unlimited Merchandise Purchases Budget April May June Quarter Budgeted unit sales Total needs Required purchases Unit cost Required dollar purchases Required 13 Required 10 >
