The company sells many styles of earrings, but all are sold for the same price - $10 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow:

January (actual)

20,000

February (actual)

26,000

March (actual)

40,000

April (budget)

65,000

May (budget)

100,000

June (budget)

50,000

July (budget)

30,000

August (budget)

28,000

September (budget)

25,000

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 bracelets sold in the following month.

Suppliers are paid $4 for each bracelet. 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 with no discounts. The company has found, however, that 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 sale. Bad debts have been negligible.

Monthly operating expenses for the company are given below:

Variable expenses:

Sales commissions 4% of sales

Fixed expenses:

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 $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter.

Other relevant data is given below:

Cash balance as of March 31 $74,000

Inventory balance as of March 31$104,000

Merchandise purchases for March$200,000

The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month.

The company has an agreement with a bank that allows the company to borrow the exact amount needed 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 will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.

Required:

Create a cash budget for the three-month period ending June 30. Include the following detailed budgets:

1.

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

b.A schedule of expected 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. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000.

PROJECT 1 - Excel Template Student Name: SALES BUDGET: April May June Quarter Budgeted unit sales 65,000 100,000 50,000 215,000 Selling price per unit EA 10 $ 10 $ 10 $ 10 Total sales 650,000 1,000,000 500,000 2, 150,000 SCHEDULE OF EXPECTED CASH COLLECTIONS: April May June Quarter February Sales 26,000 26,000 March Sales 100,000 April Sales May Sales June Sales Total cash collectionsMERCHANDISE PURCHASES BUDGET: April May June Quarter Budgeted unit sales dd desired ending inventory otal needs ess beginning inventory Required purchases Cost of purchases @ $4 per unit BUDGETED CASH DISBURSEMENTS FOR MERCHANDISE PURCHASES: April May June Quarter March Purchases pril Purchases lay Purchases June Purchases otal cash paymentsEARRINGS UNLIMITED CASH BUDGET FOR THE 3 MONTHS ENDING JUNE 30 ALI My m Q_uarter Cash balance Add collections from customers Total cash available Less disbursements Merchandise purchases Advertising Rent Salaries Commissions Utilities Equipment purchases Dividends paid Total disbursements Excess (deficiency) of receipts over disbursements Financing: Bonowings Repayments Interest Total financing 93151935112 2% .92 (29. __________