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You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributer of a designer s silk ties. The company has
You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributer of a designers silk ties. The company has an extensive franchise in 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 st You are anxious to make favorable impression on the president and have assembled the information below. The company desires to maintain a minimum ending cash balance each month of $ The ties are sold to retailers for $ each. Recent and forecasted sales in units are as follows: Month Units Month Units January Actual June February Actual July March Actual August April September May October The large buildup in sales before and during June is due to Fathers Day. Ending inventories are supposed to equal of the next months sales in units. The ties cost the company $ each. Purchases are paid for as follows: in the month of purchase and the remaining in the following month. All sales are on credit, with no discount, and payable within days. The company has found, however, that only of a months sales are collected by monthend. An additional is collected in the following month, and the remaining 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 $ for each unit tie sold Fixed: Wages and Salaries $ Utilities $ Insurance $ Depreciation $ Miscellaneous $ All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. New fixtures will be purchased during May for $ cash. The company declares dividends of $ per quarter, payable in the first month following quarter end. The company follows calendar quarters. The company has an agreement with a bank that allows it to borrow in increments of $ at the beginning of each month, up to a total loan balance of $ The interest rate on these loans is per annum, and for simplicity, we will assume that interest is not compounded. On the last day of each calendar quarter, the company must pay the bank all of the accumulated interest on the loan and as much of the loan as possible in increments of $ while still retaining at least $ in cash. The companys balance sheet at March st is shown below: Required: Prepare a master budget for the threemonth period ending June th Include the following detailed budgets schedules: A Sales budget by Month with a total for the period. B Schedule of expected cash collections from sales, by month and a total for the quarter. C Merchandise purchases budget in units and in dollars. Show the budget by month and in total. D Schedule of expected cash disbursements for merchandise purchases, by month and in total. A cash budget, show the budget by month and in total for the quarter. Your master budget must be prepared in Excel. Please use a separate tab for each required budget listed above. However, you may choose to combine requirements C and D into single tab within your Excel workbook. Your submission to Canvas should be a single selfcontained Excel workbook using formulas and references cells between workbook tabs professionally present with formatting, correct spelling, etc. You may include additional tabs schedules beyond the items listed in the requirements as appropriate. Assets Cash.........................................................................................................$ Accounts receivable...................................................................................... Inventory.................................................................................................. Prepaid insurance Fixed assets, net of depreciation Total Assets............................................................................................. $ Liabilities and Stockholders Equity Accounts payable................................................... $ Dividends payable......................................................................................... Capital stock............................................................................................... Retained earnings............................................................
You have just been hired as a management trainee by Cravat Sales Company, a nationwide distributer of
a designers silk ties. The company has an extensive franchise in 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 st You are anxious to
make favorable impression on the president and have assembled the information below.
The company desires to maintain a minimum ending cash balance each month of $ The ties are
sold to retailers for $ each. Recent and forecasted sales in units are as follows:
Month Units Month Units
January Actual June
February Actual July
March Actual August
April September
May October
The large buildup in sales before and during June is due to Fathers Day. Ending inventories are
supposed to equal of the next months sales in units. The ties cost the company $ each.
Purchases are paid for as follows: in the month of purchase and the remaining in the following
month.
All sales are on credit, with no discount, and payable within days. The company has found, however,
that only of a months sales are collected by monthend. An additional is collected in the
following month, and the remaining 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 $ for each unit tie sold
Fixed:
Wages and Salaries $
Utilities $
Insurance $
Depreciation $
Miscellaneous $
All selling and administrative expenses are paid during the month, in cash, with the exception of
depreciation and insurance expired. New fixtures will be purchased during May for $ cash. The
company declares dividends of $ per quarter, payable in the first month following quarter end. The
company follows calendar quarters.
The company has an agreement with a bank that allows it to borrow in increments of $ at the
beginning of each month, up to a total loan balance of $ The interest rate on these loans is
per annum, and for simplicity, we will assume that interest is not compounded. On the last day of each
calendar quarter, the company must pay the bank all of the accumulated interest on the loan and as
much of the loan as possible in increments of $ while still retaining at least $ in cash.
The companys balance sheet at March st is shown below:
Required:
Prepare a master budget for the threemonth period ending June th Include the following detailed
budgets schedules:
A Sales budget by Month with a total for the period.
B Schedule of expected cash collections from sales, by month and a total for the quarter.
C Merchandise purchases budget in units and in dollars. Show the budget by month and in total.
D Schedule of expected cash disbursements for merchandise purchases, by month and in total.
A cash budget, show the budget by month and in total for the quarter.
Your master budget must be prepared in Excel. Please use a separate tab for each required budget
listed above. However, you may choose to combine requirements C and D into single tab within your
Excel workbook. Your submission to Canvas should be a single selfcontained Excel workbook using
formulas and references cells between workbook tabs professionally present with formatting, correct
spelling, etc. You may include additional tabs schedules beyond the items listed in the requirements as
appropriate.
Assets
Cash.........................................................................................................$
Accounts receivable......................................................................................
Inventory..................................................................................................
Prepaid insurance
Fixed assets, net of depreciation
Total Assets............................................................................................. $
Liabilities and Stockholders Equity
Accounts payable................................................... $
Dividends payable.........................................................................................
Capital stock...............................................................................................
Retained earnings............................................................
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