Please, give a proper explanation and calculations to all questions.

Hats$-$Off Limited, a nation$-$wide distributor of branded baseball caps, has an exclusive franchise for the distribution of the caps. Sales for Hats$-$Off have increased rapidly over the past year and while the company is doing well its budgeting system is struggling to keep up with the growth and poor planning has led to the company experiencing unexpected cash shortages. You have just been hired as the companys first budgeting officer and you are eager to make a good first impression on the senior management team. Your first project is to develop a master budget for the companys third quarter $($July $1-$ September $30).$ You have gathered the information below.

The baseball caps are sold to retailers for $$15$ each. Actual unit sales for the second quarter and budgeted unit sales for the third quarter plus October are as follows:

Units:

May $($actual$)100,000$

June $($actual$)120,000$

July $($budgeted$)125,000$

August $($budgeted$)130,000$

September $($budgeted$)120,000$

October $($budgeted$)140,000$

Ending inventories should be equal to $25\%$ of the following months sales. The baseball caps cost the company $$8$ each. Purchases from the supplier are paid as follows:

$60\%$ in month of purchase

$40\%$ in month following purchase

All sales to retailers are made on account with no discounts offered and cash receipts from customers as follows:

$25\%$ collected in the month of sale

$65\%$ collected in the month following the sale

$10\%$ collected in the second month following the sale

As the sales are made to established retailers, there are no bad debts. The companys monthly selling and administrative expenses are as follows:

Variable:

Sales commissions $5\%$ of sales

Fixed:

Advertising $$450,000$

Rent $20,000$

Salaries and wages $185,000$

Power and heat $34,000$

Insurance $4,000$

Depreciation $20,000$

All selling and administrative expenses are paid in the month they are incurred except for rent which is paid every six months in February and August. Depreciation is a non$-$cash expense and includes depreciation on the new equipment. The company plans to purchase new equipment costing $$80,000$ in September. The company declared a $$50,000$ dividend in June that is payable in July.

The following is the companys balance sheet at June $30$:

ASSETS:

Cash $ $100,000$

Accounts receivable $($from May & June sales$)1,500,000$

Inventory $250,000$

Prepaid rent $20,000$

Fixed assets $($net of depreciation$)860,000$

TOTAL ASSETS: $$2,730,000$

LIABILITIES & SHAREHOLDERS EQUITY:

Accounts payable $ $388,000$

Dividends payable $50,000$

Common shares $940,000$

Retained earnings $1,352,000$

TOTAL LIABILITIES & SHAREHOLDERS EQUITY: $$2,730,000$

The company is required to maintain a minimum cash balance of $$100,000$ at the end of each month. All borrowing on the companys line of credit is done at the beginning of each month and repayments are made at the end of the month and borrowing must be done in increments of $$1,000.$ The interest rate on the line of credit is $1\%$ per month and must be paid at the end of each month based on the loan outstanding for that month.

Required:

$1.$ Prepare an operating budget for the three$-$month period ending September $30$ and include the following schedules:

a$.$ A sales budget by month and in total.

b$.$ A schedule of cash collections from sales 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 by month and in total for the three$-$month period ending September $30.$

$3.$ A budgeted income statement for the three$-$month period ending September $30.$ Use the contribution format.

$4.$ A budgeted balance sheet as at September $30$