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: May (actual) June (actual) July (budgeted) August (budgeted) September (budgeted) October (budgeted) Units 100,000 120,000 125,000 130,000 120,000 140,000 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 administra0ve expenses are as follows:

Variable: Sales commissions Adver0sing Rent Salaries and wages Power and heat Insurance Deprecia0on 5% of sales $450,000 20,000 185,000 34,000 4,000 20,000 Fixed: All selling and administra0ve expenses are paid in the month they are incurred except for rent which is paid every six months in February and August. Deprecia0on is a non-cash expense and includes deprecia0on on the new equipment. The company plans to purchase new equipment cos0ng $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 Accounts receivable (from May & June sales) Inventory Prepaid rent Fixed assets (net of deprecia0on) TOTAL ASSETS LIABILITIES & SHAREHOLDERS EQUITY Accountspayable Dividends payable Common shares Retained earnings TOTAL LIABILITIES & SHAREHOLDERS EQUITY $ 100,000 1,500,000 250,000 20,000 860,000 $2,730,000 $ 388,000 50,000 940,000 1,352,000 $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 a master 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 collec0ons 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 contribu0on format. 4. A budgeted balance sheet as at September 30.