XYZ Company markets high-quality sundials all over the world. The firm has a contract with an artisans' co-op in Greece and is able to acquire a wide variety of sundials at a fixed price.

At the end of 2020, the firm reported the following balance sheet

Cash$13,200

A/R252,800

Inventory20,400

Equipment (net)221,228

A/P$360,000

Loan Payable20,000

Common Shares50,000

Retained Earnings77,628

XYZ Company prepares rolling budgets for the upcoming three months. Information for the budget for the first quarter of 2021 follows:

The firm predicted unit sales for January, February, March, and April of 3,500, 5,000, 4,000, and 4,500 respectively.

The firm has a policy of keeping inventory on hand of 15% of the following month's sales.

The firm maintains a minimum balance in the cash account of $20,000.

80% of all sales are on account. Of the sales on account, 30% are collected in the month of the sale, 40% are collected in the following month and 25% are collected in the month after that.

The cost per unit is $40.

In addition to product cost, the firm incurs commissions of 5% of sales, depreciation on equipment of 8,400 per month, administrative costs of 3% of sales, rent of $82,000 per month, and insurance of $26,000 per month.

All purchases are on account. 40% of purchases are paid for in the month following the purchase and the remaining 60% are paid for two months after the purchase.

Actual sales for the month of November were 8,000 units and actual sales for December were 3,000 units. Actual purchases in November were $300,000 and actual purchases in December were $100,000.

The price per unit is $80

The firm can borrow money from the bank at any time. The loan carries an interest rate of 3% (per year). Any borrowing must take place at the beginning of the month in which the funds will be required. Any repayments must take place at the end of the month in which they will become possible. Interest must be paid each month on the amount outstanding as of the end of the prior month. Compute:

1. A sales budget in a proper format.

2.A purchase budget in a proper format.

3.A cash collections budget in a proper format.

4.A cash disbursements budget in a proper format.

5. A cash budget in a proper format.

6. Planning is the primary purpose of budgeting. A well-prepared and well-communicated budget helps prevent stock-outs, customer service failures, financial emergencies, and a variety of other surprises that could have been avoided. Improperly used budgets also have their downsides. In what way might the planning aspect of budgeting create problems for a firm, especially if the budget is used in performance evaluation? (please note this is an analysis question - please do provide sound theoretical analysis) thank you

Hi there, please help me solve and understand this question step by step -I want to learn how it's done.

Also - the topic is Budgeting (Management/managerial accounting)

Book reference: MCGRAW-HILL 12TH EDITION, Garrison, Webb & Libby

Thank you so much, appreciate it! Will rate you for your hard work! :)