You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designers silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $10,000. The ties are sold to retailers for $8 each. Recent and forecasted sales in units are as follows:

January (actual) 25,000 June 68,000

February (actual) 33,000 July 44,000

March (actual) 28,000 August 40,000

April 41,000 September 35,000

May 48,000

The large buildup in sales before and during June is due to Fathers Day. Ending inventories are supposed to equal 90% of the next months sales in units. The ties cost the company $5 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 25% of a months sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following sale. Bad debts have been negligible. The companys monthly selling and administrative expenses are given below: Variable: Sales commissions $ 1 per tie Fixed: Wages and salaries $ 27,500 Utilities $ 18,200 Insurance $ 1,200 Depreciation $ 1,500 Miscellaneous $ 3,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $22,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The companys balance sheet at March 31 is given below: Assets Cash $ 10,000 Accounts receivable ($66,000 February sales; $168,000 March sales) 234,000 Inventory (36,900 units) 184,500 Prepaid insurance 14,400 Fixed assets, net of depreciation 150,450 Total assets $ 593,350 Liabilities and Stockholders Equity Accounts payable $ 99,250 Dividends payable 12,000 Capital stock 300,000 Retained earnings 182,100 Total liabilities and stockholders equity $ 593,350 The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $150,000. 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 $10,000 in cash.

REQUIRED:

A schedule of expected cash disbursements for merchandise purchases, by month and in total. (Leave no cells blank - be certain to enter "0" wherever required.) Budgeted Cash Disbursements for Merchandise Purchases:

April May June Quarter

Total March purchases:

April purchases:

May purchases:

June purchases:

Total cash payments:

REQUIRED:

Budgeted Income Statement: For the Three Months Ended June 30

Sales

Revenue

Variable expenses:

Cost of Goods Sold

Commissions

Fixed expenses:

Wages and Salaries

Utilities

Insurance Expired:

Depreciation

Miscellaneous

Net Operating Income

Interest expense:

Net Income

REQUIRED:

Budgeted Balance Sheet: June 30 Assets:

Cash

Accounts receivable

Inventory

Unexpired

insurance Fixed assets,

net of depreciation

Total Assets: Liabilities & Stockholders Equity

Accounts payable

purchases

Dividends

Loans payable, bank

Capital stock, no par

Retained earnings

Total liabilities and stockholders equity: