You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earring to various retail outlets located in shopping malls across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare comprehensive budgets for the upcoming second quarter in order to show management the benefits that can be gained from an integrated budgeting program. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same price- $13 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): January (actual)... 20,600 June (budget)... 50,600 February (actual)... 26,600 July (budget)... 30,600 March (actual)... 40,600 August (budget ... 28,600 April (budget)... 65,600 September (budget) 25,600 May (budget)... 100,600 The concentration of sales before and during May is due to Mothers Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month.

Suppliers are paid $4.3 for a pair of earrings. One-half of a months purchases are paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a months sales are collected in the month of sale. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. Monthly operating expenses for the company are given below: Variable: Sales commissions..................4% of sales Fixed: Advertising.....................$230,000 Rent................................ $21,000 Salaries........................112,000 Utilities.........................8,500 Insurance......................3,300 depreciation.................17,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $17,500 in new equipment during May and $43,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $17,250 each quarter, payable in the first month of the following quarter. A listing of the companys ledger accounts as of March 31 is given below: Assets Cash.............................................................................$ 77,000 Accounts Receivable($34,580 February sales; $422,240 March Sales)................................. 456,820 Inventory...................................................................... 112,832 Prepaid insurance......................................................... 22,500 Property and equipment(net)....................................... 980,000 Total Assets................................................................. $1,649,152 Liabilities and Stockholders Equity Accounts Payable.........................................................$ 103,000 Dividends Payable......................................................... 17,250 Capital stock................................................................. 860,000 Retained Earnings......................................................... 668,902 Total liabilities and stockholders equity $1,649,152 The company maintains a minimum cash balance of $53,000. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. 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. 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 $53,000 in cash. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: Required Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: 1b. A schedule of expected cash collections from sales, by month and in total

	April	May	June	,Quarter
February sales	?	?	?	2,818,400
March sales	?	?	?	563,680
April sales	?	?	?	1,881,880
May sales	?	?	?	34,850
June sales	?	?	?	0
Total Cash Sales	1,427,670	2,166320	1,704,820	5,298,810

1c. A merchandise purchases budget in units and in dollars. Show the budget by month and in toal

	April	May	June	Quarter
Budgeted unit sales	?	?	?	?
?	?	?	?	?
Total needs	105,840	120,840	62,840	216,800
?	?	?	?	?
Required purchases	79,600	80,600	42,600	130,080
Unit Cost	?	?	?	?
Required $ purchases	1,034,800	1,047,800	553,800	1,691,040

1d. A schedule of expected cash dibursements for merchandise purchases, by month in total

	April	May	June	Quarter
Accts. payable	?	?	?	2,636,400
April purchases	?	?	?	436,020
May purchases	?	?	?	447,430
June purchases	?	?	?	0
Total cash payments	1,308,940	1,392,230	818,680	3,519,850