Question You have just been hired as a new management trainee by Subang Trading (SUBANG), a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, SUBANG 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. SUBANG sells many styles of earrings, but all are sold for the same price, RM10 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) 20,000 June (budget) 50,000 February (actual) 26,000 July (budget) 30,000 March (actual) 40,000 August (budget) 28,000 April (budget) 65,000 september (budget) 25,000 May (budget) 100,000 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 RM4 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 the sale. Bad debts have been negligible. Monthly operating expenses for the company are given below Variable: Sales commissions Fixed: 4% of sales (RM) Advertising 200,000 Rent 18,000 Salaries 106,000 Utilities 7,000 Insurance 3,000 Depreciation 14,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase RM16,000 in new equipment during May and RM40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of RM15,000 each quarter, payable in the first month of the following quarter. The company's balance sheet as of 31 March is given below: RM Assets Cash 74,000 Accounts receivable (RM26,000 February 346,000 sales, RM320,000 March sales) Inventory 104,000 Prepaid insurance 21,000 Property and equipment (net) 950,000 Total assets 1,495,000 Liabilities and stockholders' Equity Accounts payable 100,000 Dividends payable 15,000 Common stock 800,000 Retained earning 580,000 1,495,000 Total Liabilities and Stockholders' Equity The company maintains a minimum cash balance of RM50,000. All borrowing is done at the beginning of a month; any repayments are made at the end of the month. The company has an agreement with a bank that allows the company to borrow in increments of RM1,000 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 the accumulated interest on the loan and as much of the loan as possible (in increments of RM1,000), while retaining at least RM50,000 in cash. Required: Prepare a master budget (using a spreadsheet in Excel) for the second quarter ending 30 June Include the following detailed schedules: 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 RM. Show the budget by month and total. d) A schedule of expected cash disbursements for merchandise purchases, by month and in total. e) 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 RM50,000. f) A budgeted income statement for the second quarter period ending 30 June. Use the contribution approach. g) A budgeted balance sheet as of 30 June.