You have just been hired as a new management trainee by Sneekies Inc., a distributor of low$-$cost sneakers 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. You have decided to prepare comprehensive budgets for the upcoming first 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 sneakers but all are sold for the same price$$$$24\mathrm{.}00$ per pair. Actual sales of sneakers for the last three months and budgeted sales for the next six months follow $($in pairs of shoes$)$:

October $($actual$)37,000$

November $($actual$)29,000$

December $($actual$)48,000$

January $($budget$)45,000$

February $($budget$)70,000$

March $($budget$)57,000$

April $($budget$)52,000$

May $($budget$)49,000$

June $($budget$)36,000$

Sufficient inventory should be on hand at the end of each month to supply $20\mathrm{.}0\%$ of the shoes sold in the following month.

The Company pays suppliers $$15\mathrm{.}00$ for a pair of shoes. One$-$half of a month's purchases is 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 sales collected as follows:

$35\%$ of a month$$s sales are collected in the month of sale

$55\%$ is collected in the following month

$10\%$ is collected in the second month following sale

Monthly operating expenses for the company are given below:

Variable:

Sales Commissions $8\%$ of sales

Fixed:

Advertising $$81,000$

Rent $$54,000$

Salaries $$102,000$

Utilities $$10,000$

Insurance $$8,000$

Depreciation $$15,000$

Insurance is paid on an annual basis, on August $1$st of each year.

The company plans to purchase $$68,800$ in new equipment during February and $$33,000$ in new equipment during March; both purchases will be for cash. The company declares dividends of $$20,000$ each quarter, payable in the first month of the following quarter. A listing of the company's ledger accounts as of December $31$ is given below.

ASSETS

Cash $70,000$

Accounts Receivable$*818,400$

Inventory $135,000$

Prepaid Insurance $56,000$

Property and Equip $($net of depreciation$)855,000$

Total Assets $$1,934,400$

$*$Balance indicates $$69,600$ in November sales and an additional $$748,800$ in December sales.

LIABILITIES & STOCKHOLDERS' EQUITY

Accounts Payable $355,500$

Dividends Payable $20,000$

Common Stock $750,000$

Retained Earnings $808,900$

Total Liabilities & Stockholders' Equity $$1,934,400$

The company maintains a minimum cash balance of $$50,000.$

The company has an agreement with a bank that allows the company to borrow cash at the beginning of each month. The interest rate on these loans is $1\mathrm{.}25\%$ per month and, for simplicity, we'll assume that interest is not compounded. All borrowing is done at the beginning of a month; any repayments are made at the end of a month; the Company makes repayments in any month when the cash is available while still retaining at least $$50,000$ in cash. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan.

REQUIRED: Prepare a master budget for the three$-$month period ending March $31.$ Include the following detailed budgets:

$1.$

a$.$ A sales budget, by month and in total.

b$.$ A schedule of expected cash collections from sales, by month and in total.

c$.$ A merchandise purchases budget in units and in dollars. Show the budget by month and in total.

d$.$ A schedule of expected cash disbursements for merchandise purchases, by month and in total.

$2.$ A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $$50,000.$

$3.$ A budgeted income statement for the three$-$month period ending March $31.$ Use the contribution approach.

$4.$ A budgeted balance sheet as of March $31.$