You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings 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 a master budget for the upcoming second quarter. 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-$10 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) 20,000 February (actual) 26,000 March (actual) 40,000 April (budget) 65,000 May (budget) 100,000 June (budget) 50,000 July (budget) 30,000 August (budget) 28,000 September (budget) 25,000The concentration of sales before and during May is due to Mother's Day, Sufficient imemory 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 for a pair of earrings. One-ball of a month's purchases is paid for in the month of purchase: the other half is paid for is the following month. All sales are on credit. Only 20%% of a month's 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. Pare 404 Variable Sales commissions 4% of sales Fixed: Advertising $200,000 Rem $18,000 Salaries $106,000 Utilities $7.000 Inarance $3,000 Depreciation $14,000Insurance is paid on an annual basis, in November of each year. The company plans to purchase $16,000 in new equipment during May and 540.000 in new equipment during June; both purchases will by for cas company declares dividends of $15,000 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below, Cash $ 74.000 Accounts receivable ($26000 February sales $320.000 March sales) 346.000 Imcatory 10-4.000 Prepaid insurance 21.000 Property and equipment (net) $501000 Total assets $1.495.000 Liabilities and Stockholders Equity Accounts payable $ 100 000 Dividends parable 15.000 Common stock HOOTOOD Retained earnings 580.000 Total liabilities and stockholder's equity $1.495,000The company maintains a minimum cash balance of $50.090. All borrowing is done at the beginning of a monthc 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 $1.909 at the beginning of each month. The interest rate on these loans is I'S per month and fot simplicity up will assume that interest is not compounded At the end of the quarter, the company would pay the hunt all of the accumulated inbereit on the kun and in much of the loan as possible ( in increments of $1,000), while still retaining at least $50,000 in cash. Required Prepare a mailer budget for the three march period ending June 30, Include the folkrwing detailed schedules I. a. A sakes budget, by mouth and in total b. A schedule of expected cash collections, 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 cath disbursements for merchandise purchases, by month and in boul. 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 $500 0 3. A budgeted income staterient for the three-morth period ending June 30. Use the contribution approach. 4. A b dotted balance sheet as of June 30