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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
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 $ per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow in pairs of earrings:
tableJanuary actualJune budgetFebruary actualJuly budgetMarch actualAugust budgetApril budgetSeptember,May budget
The concentration of sales before and during May is due to Mother's Day. Sufficient inventory should be on hand at the end of each month to supply of the earrings sold in the following month.
Suppliers are paid $ for a pair of earrings. Onehalf 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. Only of a month's sales are collected in the month of sale. An additional is collected in the following month, and the remaining is collected in the second month following sale. Bad debts have been negligible.
Monthly operating expenses for the company are given below:
The company plans to purchase $ in new equipment during May and $ in new equipment during June; both purchases will be for cash. The company declares dividends of $ each quarter, payable in the first month of the following quarter.
The company's balance sheet as of March is given below:
tableAssets$
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