Shannon School of Business:Financial and Information Management COURSE: ACCT 5204 Managerial Accounting SECTION: Section 10, Tuesday: 9:00AM 11:30AM Cineplex, CPLX7 LECTRURER: Grace Chitate DUE DATE: Nov 29, 2022 ASSIGNMENT: BUDGETING CASE OBJECTIVE The key objectives of this assignment are for students to create master budget supporting schedules, apply key concepts to solve a comprehensive budgeting case and collaborate in small groups in discussing budgeting ideas learnt during this course. This seeks to enhance students grasp of the critical role budgeting and budgetary control plays in effectively carrying out a management accountants responsibilities. LEARNING OUTCOMES This assignment aligns with the following learning outcomes stated in the course syllabus: Prepare a master budget including the supporting components and schedules Prepare and analyze financial statements using various costing approaches. STRUCTURE AND EXPECTATIONS This assignment is based on Knockoffs Unlimited (Case 9-27). The assignment has modified the numbers in the original case to challenge students to think of different set of calculations and quantitative analysis from those stated in the recommended textbook. Students are expected to prepare the following budgets with detailed explanations or workings as required: Sales Budget Cash Collections schedule Cash disbursements schedule Cash budget Budgeted Income Statement HOW TO SUBMIT THE ASSIGNMENT You can submit any of the following formats: -excel file, word document or pdf.The assignment will be graded in line with the rubric posted on Moodle. QUESTION Adapted from Case 9-27 Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the companys budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression on the president and have assembled the information below. The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows: January (actual) 28,000 June 66,000 February (actual) 42,000 July 46,000 March (actual) 55,000 August 44,000 April 81,000 September41,000 May 115,000 The large buildup in sales before and during May is due to Mothers Day. Ending inventories should be equal to 40% of the next months sales in units. The necklaces cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a months sales are collected by month-end. 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. The companys monthly selling and administrative expenses are given below: Variable: Sales commissions 4 % of sales Fixed: Advertising $248,000 Rent 26,000 Wages and salaries 125,200 Utilities 13,400 Insurance 6,200 Depreciation 30,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,400 in new equipment during May and $56,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,200 each quarter, payable in the first month of the following quarter. The companys balance sheet at March 31 is given below: Assets Cash $ 90,000 Accounts receivable ($42,000 February sales; $440,000 March sales) 482,000 Inventory 129,600 Prepaid insurance 43,400 Fixed assets, net of depreciation 1,030,000 Total assets $1,775,000 Liabilities and Shareholders Equity Accounts payable $ 130,800 Dividends payable 18,200 Common shares 960,000 Retained earnings 666,000 Total liabilities and shareholders equity $1,775,000 The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month, with any repayments made at the end of the month. The interest rate on these loans is 1% per month and must be paid at the end of each month based on the outstanding loan balance for that month. Required: 1. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: a. A sales budget by month and in total. (10mks) b. A schedule of expected cash collections from sales, by month and in total. (15mks) c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. (15mks) d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. (15mks) 2. A cash budget. Show the budget by month and in total. (25mks) 3. A budgeted income statement for the three-month period ending June 30. Use the variable costing approach. (20mks)