1. Prepare a sales budget for January through March and for the Quarter in total. The selling price per unit is $45.00.

December of the previous year 100,000

January 10,000

February 70,000

March 10,000

April 40,000

2. Prepare a purchases budget and the schedule for Disbursements for Purchases for January through March and for the first quarter in total. Assume that the company only sells one product that can be purchased at $35.00 per unit. The market for this product is very competitive and customers highly value quality and on time delivery of the product. Also assume that currently it is company policy that ending inventory should equal 50% of next months projected sales.

3. Prepare a cash budget for January through March and for the first quarter in total. The company maintains a minimum cash balance of $80,000.00, and this was the balance in the cash account on Dec 31.

Past experience shows that 40% of sales are collected in the month of the sale, and 60% in the month following the sale.

Selling cost is $12 per unit sold. Other expenses include $35,000 per month for rent, $104,000 for advertising, and $76,000 per month for depreciation. All costs are paid in the current month except inventory purchases, which are paid in the month following the purchase (i.e. January purchases of inventory are paid in February). The company has an open line of credit with a bank and can borrow at an annual rate of 12%. For simplification assume that all loans are made at the beginning of the month when a borrowing need is identified and repayments are made at the end of a month if there is enough cash to make the payment. Also, interest associated with a loan is only paid at the time when that loan is paid (i.e. a loan is only paid if there is enough cash to pay off the whole loan, any interest associated with it and still have enough cash left over for the minimum cash balance.)

4. Prepare the Budgeted Income Statement based on the information given above.

Thank you !