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March 31, using 10 Prepare a budgeted income statement for the quarter ending lowing format: Lewe Cost o goods sold Cost of goods old- Budgeted cost of manufacturing one unit K Number of units sold Cash budgets under two alternatives (Learning Objectives 2&3) Each autumn, as a hobby, Hannah Olson weaves cotton placemats to shop. The mats sell for $30 per set of four mats. The shop charges remits the net proceeds to Olson at the end of December. Olson has woven and 26 sets in each of the last two years. She has enough cotton in inventory to 26 sets. She paid $8 per set for the cotton. Olson uses a four-harness loom that she chased for cash exactly two years aga. It s depreciated at the rate of $5 per month. The accounts payable relate to the cotton inventory and are payable by September 30 P9-58A sell at a local craft a 20% commission and solch and make another pur- Olson is considering buying an eight-harness loom so that she can weave terns in linen. The new loom costs S1,00itwold be deprecated at S20 per month. Her bank has agreed to lend her $1,000 at 18% interest with $200 principal plus accrued interest payable each December 31. Olson believes she can weave 16 linen placemat sets in time for the Christ mas rush if she does not weave any cotton mats. She predicts that each linen set will sell for S565. Linen costs $20 per set. Olson's supplier will sell her linen on credit, payable December 31 more intricate pat Olson plans to keep her old loom whether or not she buys the new loom. The balance sheet for her weaving business at August 31 is as follows: Balance August 31 5 Current assets: Inventory of cotton Total current assets plant, and equipment tal property, plant, and equipment 13 Total assets and S 16 Accounts 17 equity Requirements 1. Prepare a combined cash budget for the four months ending December 31, for two alterna- tives: weaving the placemats in cotton using the existing loom and weaving the placemats in linen using the new loom. For each alternative, prepare a budgeted income statement for the four months ending December 31 and a budgeted balance sheet at December 31 2. On the basis of financial considerations only, what should Olson do? Give your reason. 3. What nonfinancial factors might Olson consider in her decision

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