80.2K

Verified Solution

Link Copied!

What is the process for me to get the budget for expected cash collections for the months of March-June? How do I get the Merchandise purchase budget? It has been breaking my head. I tried everything and nothing helps.

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-$19 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings): anuary (ctl) 23,000 June (budget) February (actual) 29,000 July (budget) March (actual) 43,800 August (budget) 31,000 April (budget) 68,000 September (budget) 28,000 May (budget) 53,000 33,800 103,000 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 40% of the earrings sold in the following month. Suppliers are paid $5.50 for a pair of earrings. One-half of a month's purchases is paid for in the month of purchase hernafis paid for in 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%1s 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 Rent Salaries Utilities Insurance Depreciation $350,00e $ 33,00e $136,000 $ 14,50e $ 4,50e $ 29,00e Insurance is paid on an annual basis, in November of each year The company plans to purchase $23,500 in new equipment during May and $55,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $26,250 each quarter, payable in the first month of the following quarter Required Prepare a master budget for the three-month period ending June 30. Include the following detailed schedules: 1. a. A sales budget, by month 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 cash disbursements for merchandise purchases, by month and in total. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to m aintain the minimum cash balance of $65,000 3. A budgeted income statement for the three-month period ending June 30. Use the contribution approach. 4. A budgeted balance sheet as of June 30. Req 1A Req 1B Req 1C Req 1D Req 2 Req 3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a sales budget, by month and in total Sales Budget April 68,000 May June Quarter 103,000 Budgeted unit sales Selling price per unit Total sales 224,000 19 $1,292,000 $1,957,000 $1,007,000 $4,256,000 53,000 19 $ 19 S Req 1A Req 1B Req 1A Req 1B Req 1C Req 1D Req 2 Req 3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a schedule of exp month and in total Earrings Unlimited Schedule of Expected Cash Collections April May June Quarter 55,100 February sales March sales April sales May sales June sales Total cash collections$ 55,100 0$ 55,100$ 55,100 Req 1A Req 1B Req 1C Req 1D Req 2 Req 3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a merchandise pu and in dollars. Show the budget by month and in total. (Round unit cost to 2 decimal places.) Earrings Unlimited Merchandise Purchases Budget April June Quarter Budgeted unit sales Add: Desired ending merchandise inventory Total needs ess: Beginning merchandise inventory Required purchases Unit cost Required dollar purchases Req 1A Req 1B Req 1C Req 1D Req 2 Req 3 Req 4 Prepare a master budget for the three-month period ending June 30 that includes a schedule of for merchandise purchases, by month and in total. Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter Accounts payable April purchases May purchases June purchases Total cash paymentsS 0 S 0 S Earrings Unlimited Cash Budget For the Three Months Ending June 30 April June Quarter Beginning cash balance Add collections from customers Total cash available Less cash disbursements Merchandise purchases Rent Salaries Commissions Utilities Equipment purchases Dividends paid Total cash disbursements Excess (deficiency) of cash available over disbursements Financing Borrowings Repayments Interest Total financing Ending cash balance Earrings Unlimited Budgeted Income Statement For the Three Months Ended June 30 Variable expenses: Fixed expenses: Advertising Rent Salaries Insurance Depreciation Net operating income Net income Earrings Unlimited Budgeted Balance Sheet June 30 Assets Total assets Liabilities and Stockholders' Equity Total liabilities and stockholders equity$

Answer & Explanation Solved by verified expert

See Answer