To prepare a master budget for January, February, and March of 2018, management gathers the following information.

a. Blue Groups single product is purchased for $30 per unit and resold for $57 per unit. The expected inventory level of 4,500 units on December 31, 2017, is more than managements desired level for 2018, which is 20% of the next months expected sales (in units). Expected sales are: January, 8,250 units; February, 9,750 units; March, 12,025 units; and April, 10,500 units.

b. Cash sales and credit sales represent 45% and 55%, respectively, of total sales. Of the credit sales, 70% is collected in the first month after the month of sale and 30% in the second month after the month of sale. For the December 31, 2017, accounts receivable balance, $125,000 is collected in January and the remaining $395,000 is collected in February.

c. Merchandise purchases are paid for as follows: 35% in the first month after the month of purchase and 65% in the second month after the month of purchase. For the December 31, 2017, accounts payable balance, $80,000 is paid in January and the remaining $285,000 is paid in February.

d. Sales commissions equal to 12% ofsales are paid each month. Salessalaries(excluding commissions) are $254,000 per year. e. General and administrative salaries are $321,000 per year. Maintenance expense equals $2,550 per month and is paid in cash.

f. Equipment reported in the December 31, 2017, balance sheet was purchased in January 2017. It is being depreciated over eight years under the straight-line method with no salvage value. The following amounts for new equipment purchases are planned in the coming quarter: January, $29850; February, $62525; and March, $95750. This equipment will be depreciated under the straight-line method over eight years with no salvage value. A full months depreciation is taken for the month in which equipment is purchased.

g. The company plans to acquire land at the end of March at a cost of $145,000, which will be paid with cash on the last day of the month. h. Blue Group has a working arrangement with its bank to obtain additional loans as needed. The interest rate is 12% per year, and interest is paid at each month-end based on the beginning balance. Partial or full payments on these loans can be made on the last day of the month. The company has agreed to maintain a minimum ending cash balance of $54,400 in each month. i. The income tax rate for the company is 30%. Income taxes on the first quarters income will not be paid until April 15. Fall 2019 Blue Group Project Requirements: Prepare a master budget for each of the first three months of 2018; include the following component budgets (show supporting calculations as needed directly behind or on the same page as that budget, and round amounts to the nearest dollar):

1.) Monthly sales budgets (showing both budgeted unit sales and dollar sales).

2.) Monthly merchandise purchases budgets.

3.) Monthly selling expense budgets.

4.) Monthly general and administrative expense budgets.

5.) Monthly capital expenditures budgets.

6.) Monthly cash budgets.

7.) Budgeted income statement for the entire first quarter (not for each month).

8.) Budgeted balance sheet as of March 31, 2018

9.) Prepare a written analysis summarizing your findings. Please include:

i.) Financial ratios in your discussion of the companys financial position. You must include at least 3 different ratios, and at least 1 from each ratio category ii.) What accounting recommendations do you have for the new company? iii.) What business recommendations do you have to help the new company? iv.) What did you learn from preparing a Master Budget? v.) Do you find this to be an easy or challenging project? Why?

BLUE GROUP COMPANY Estimated Balance Sheet December 31, 2017 Liabilities and Equity $37,000 Accounts payable 520,000 Bank loan payable Assets Cash Accounts receivable $365,000 15,000 92,000 135,000 Taxes payable $472,000 Inventory Total current assets Equipment Less accumulated depreciation $543,000 (due 3/15/2018) 692,000 Total liabilities Common stock 475,125 Retained earnings Total stockholders' equity $1,167,125 Total liabilities and equity 471,000 224,125 695,125 $1,167,125 Total assets