You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer's 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 the responsibility for all planning and budgeting. Your first assignment is to prepare 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.

You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributor of a designer's 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 the responsibility for all planning and budgeting. Your rst assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorablel 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) ............... 20,000 February (actual) ......... m. 24,000 March {actual) ............ m 28,000 m ..................... \"35,000 May ........................ 45,000 Jung, ............ m. 60,000 July, .................. 40,000 $09,051, ............... 36,000 m ............ 32,000 The large buildup in sales before and during June is dues to Father's Day. Ending inventories are supposed to equal 90% of the next month's sales in units. The ties cost the company $5 each Purchases are made on accOunts payable and 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 month's sales are collected by month end. An additional 50% of the original sales revenue is collected in the following month, and the remaining 25% of the original sales revenue is collected in the second month following sale. You have been instructed to ignore bad debts. The company's monthly selling and administrative expenses are given below: Variable: Sales commissions ...... $1 per tie Fixed: Wages and salaries ...... $22,000 Utilities ............... $1 4,000 insurance ......... m$1 ,200 Depreciation ...... m. $1,500 Miscellaneous ...... WW303,000 Sales commissions All operating expenses are paid during the month, in cash, with the exception of depreciation and insurance expired Land will be purchased during May for $25,000 cash. The company declares dividends of $12,000 each quarter, payable in the rst month of the following quarter. The, mom baiaeeesheetatMamltSl is 31mm: Assets Gash $14,000 mmaeceimble' $216,000 monsoom $157,500 mm $14,400 Fixed assets, net of depreciation $172,700 IoteLassets 3574,600 \" AIR ($48,000 February sales, $168,000 March sales) We: MW mum Wearable $85,750 Wearable $12,000 Gammon shares $300,000 Meanings w Total liabilities and shareholders' equity $574,600 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, up to a total loan balance of $130,000. 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 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: Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: 1. A sales budget by month and in total. 2. A schedule of expected cash collections from sales, by month and in total. 3. A merchandise purchases budget in units and dollars. Show the budget by month and in total. 4. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 5. A cash budgets. Show the budget by month and in total