The Distribution Center of 123 Oil and Gas Company wants a master budget for the next three months, beginning January 1st. It desires an ending minimum cash balance of $4,000 each month. Sales are forecasted at an average selling price/transfer price of $4 per widget. In January, the Distribution Centre is beginning just-in-time deliveries from suppliers, which means that purchases equal expected sales. The December 31 inventory balance will be drawn down to $5,000, which will be the desired ending inventory thereafter. Purchase price per widget is $2. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within thirty days, but experience has shown that 60 percent of current sales are collected in the current month, 30 percent in the next month, and 10 percent in the month thereafter. Bad debts are negligible. The Distribution Centre sells to related sister corporations as well as outside/external sales. The following are some of the expenses for the Distribution Centre: Wages and salaries Insurance expired Depreciation Miscellaneous Rent $12,000/month 100/month 200/month 2,000/month 200/month + 10% of quarterly sales over $10,000 Cash dividends of $1,000 are to be paid quarterly, beginning January 15, and are declared on the fifteenth of the previous month. All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $200 is paid at the beginning of each month and the additional 10 percent of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10. The company plans to buy some new office fixtures for $2,000 cash in March. To the distribution company this will be considered a capital purchase. Money can be borrowed and repaid in multiples of $500, at an interest rate of 12 percent per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the end of the months in question. Money is never borrowed at the beginning and repaid at the end of the same month. Compute interest to the nearest dollar. ASSETS AS OF DECEMBER 31, LIABILITIES AS OF DECEMBER 31, Cash $4,000 Accounts payable (merchandise) $28,750 Accounts receivable 16,000 Dividends payable 1,000 Inventory* 31,250 Rent payable 6,000 Prepaid insurance 1,200 $35.750 Fixed assets, net 10,000 $62.450 *November 30 inventory balance = $12,500 Recent and forecasted sales: October $30,000 December November $20,000 January $20,000 February $60,000 $50,000 March $30,000 April $36,000 Required Prepare a master budget for the following schedules identified below. Use Excel and incorporate a formula based spread sheet whenever possible. I will be altering the sales figures in your submitted Excel spread sheet to test your formulas. Work Sheet/Template Cash Collections Schedule January February March 60% of current months sale 30% of previous months sale 10% of second previous months sale Total collections Purchase Budget December January February March Desired Ending Inventory Cost of Goods Sold Total Needed Beginning Inventory Purchases Statement of Cash Receipts and Disbursements January February March Cash Balance Beginning Plus Cash Collections =Cash Available Before Financing Less Cash Disbursements: Purchases Rent Wage and Salaries Miscellaneous Expenses Dividends Purchase of Fixtures Total Disbursements Plus Minimum Cash Desired Total Cash Needed Excess (Deficiency) Financing: Borrowing, at the beginning of period Repayment, at the end of period Interest at 12% per annum Cash Balance, end The Distribution Center of 123 Oil and Gas Company wants a master budget for the next three months, beginning January 1st. It desires an ending minimum cash balance of $4,000 each month. Sales are forecasted at an average selling price/transfer price of $4 per widget. In January, the Distribution Centre is beginning just-in-time deliveries from suppliers, which means that purchases equal expected sales. The December 31 inventory balance will be drawn down to $5,000, which will be the desired ending inventory thereafter. Purchase price per widget is $2. Purchases during any given month are paid in full during the following month. All sales are on credit, payable within thirty days, but experience has shown that 60 percent of current sales are collected in the current month, 30 percent in the next month, and 10 percent in the month thereafter. Bad debts are negligible. The Distribution Centre sells to related sister corporations as well as outside/external sales. The following are some of the expenses for the Distribution Centre: Wages and salaries Insurance expired Depreciation Miscellaneous Rent $12,000/month 100/month 200/month 2,000/month 200/month + 10% of quarterly sales over $10,000 Cash dividends of $1,000 are to be paid quarterly, beginning January 15, and are declared on the fifteenth of the previous month. All operating expenses are paid as incurred, except insurance, depreciation, and rent. Rent of $200 is paid at the beginning of each month and the additional 10 percent of sales is paid quarterly on the tenth of the month following the quarter. The next settlement is due January 10. The company plans to buy some new office fixtures for $2,000 cash in March. To the distribution company this will be considered a capital purchase. Money can be borrowed and repaid in multiples of $500, at an interest rate of 12 percent per annum. Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid. Assume that borrowing takes place at the beginning, and repayment at the end of the months in question. Money is never borrowed at the beginning and repaid at the end of the same month. Compute interest to the nearest dollar. ASSETS AS OF DECEMBER 31, LIABILITIES AS OF DECEMBER 31, Cash $4,000 Accounts payable (merchandise) $28,750 Accounts receivable 16,000 Dividends payable 1,000 Inventory* 31,250 Rent payable 6,000 Prepaid insurance 1,200 $35.750 Fixed assets, net 10,000 $62.450 *November 30 inventory balance = $12,500 Recent and forecasted sales: October $30,000 December November $20,000 January $20,000 February $60,000 $50,000 March $30,000 April $36,000 Required Prepare a master budget for the following schedules identified below. Use Excel and incorporate a formula based spread sheet whenever possible. I will be altering the sales figures in your submitted Excel spread sheet to test your formulas. Work Sheet/Template Cash Collections Schedule January February March 60% of current months sale 30% of previous months sale 10% of second previous months sale Total collections Purchase Budget December January February March Desired Ending Inventory Cost of Goods Sold Total Needed Beginning Inventory Purchases Statement of Cash Receipts and Disbursements January February March Cash Balance Beginning Plus Cash Collections =Cash Available Before Financing Less Cash Disbursements: Purchases Rent Wage and Salaries Miscellaneous Expenses Dividends Purchase of Fixtures Total Disbursements Plus Minimum Cash Desired Total Cash Needed Excess (Deficiency) Financing: Borrowing, at the beginning of period Repayment, at the end of period Interest at 12% per annum Cash Balance, end