with tutorial of how to calculate on excel in each step.
CASE SCENARIO You have just been hired as a new management trainee by Bahrain Company, a distributor of earrings to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same prico-S11 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings) January (actual) 20 200 June (budget) 50.200 February (actual) 26 200 July (budget) 30 200 March (actual) 40,200 August (budget) 28 200 April (budget) 65 200 September (budget) 25,200 May (budget) 100 200 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 earrings sold in the following month Suppliers are paid $4.10 for a pair of earrings. 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. 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% la collected in the second month following sale. Bad debts have been negligible Monthly operating expenses for the company are given below. Variable: Sales commissions of sales Fixed: Advertising 5210,000 Rent $10.000 Salaries $ 100 000 Utilities 57.500 Insurance 5 3 100 Depreciation $15.000 Insurance is paid on an annual basis in November of each year. Activate Windows The company plans to purchase $16,500 in new equipment during May and $41,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,750 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below: Assets Cash $ 75000 Accounts receivable ($28,820 February sales, $353,760 March sales) 382 500 Inventory 106,028 Prepaid insurance 21,500 Property and equipment (net) 960 000 Total assets $ 1546,008 Liabilities and Stockholders' Equity Accounts payable $ 101,000 Dividends payable 15,750 Common stock 820,000 Retained earnings 600.258 Total liabilities and stockholders equity 51546,000 The company maintains a minimum cash balance of $51,000. 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 in increments of $1,000 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 would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1.000), while still retaining at least $51,000 in cash. 5. 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 $51,000. 6. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. 7. A budgeted balance sheet as of June 30. In preparing your answers in the excel file you should generally design the excel file to include the following sheets: Budget launch page (content page) Beginning balance budget Budgeting assumptions Sales budget Schedule expected cash collections Merchandise purchases budget Schedule expected cash disbursements Cash budget Budgeted income statemont. Budgeted balance shoot. Relevant explanations of your calculations
