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You have just been hired as a management trainee by Delta Sales Company, a nationwide distributor of a designer's silk ties. The company has an

You have just been hired as a management trainee by Delta 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 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 $30,000. The price per unit is $100. Recent and forecasted sales units (Bicycles) are as follows:
\table[[Month Actual,Month Planned Month,Planned,,],[January 3,000,April,8,000,July,5,000],[February 2,000,May,9,000 August,6,000,],[March 5,000,June,10,000,September,9,000]]
The large buildup in sales before and during June is due to Father's Day. Ending inventories are supposed to equal 20% of the next month's sales. The cost of sales is expected to be 40% of the monthly sales.
Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. The company has found, however, that 70% of a month's sales are collected by month-end. An additional 30% is collected in the following month.
The company's monthly operating expenses are given below:
Variable: Sales commissions 10% of sales
Fixed: Wages and salaries $200,000
Utilities ,60,000
Insurance ,30,000
Depreciation ,10,000
All operating expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. The company's balance sheet at March 31 is given below:
\table[[Assets,,Liabilities & Stockholders' Equity,],[Cash,$50,000,Notes payable,$700,000
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