You just got a job with Bling, Inc. The company distributesbracelets to various retail outlets across the country. In thepast, the company hasn’t done budgeting and they run short on cashperiodically.

Because your wonderful Cost Accounting teacher prepared you sowell, you decided to prepare comprehensive budgets for the secondquarter in order to show management the benefits. You includedother departments in your decision making process and have gatheredthe information below.

The company sells many styles ofbracelets, but they are all sold for $16 each. Actual sales ofbracelets in units for the last three months and budgeted sales arebelow:

January (actual)	22,000	June (budget)	52,000
February (actual)	28,000	July (budget)	32,000
March (actual)	42,000	August (budget)	30,000
April (budget)	67,000	September (budget)	27,000
May (budget)	102,000

The increase in sales before and during May is due to Mother’sDay. Bling, Inc. wants to make sure they have enough inventory onhand at the end of each month to supply 40% of the bracelets soldin the following month.

Manufacturers are paid $5 for eachbracelet. 50% of a month’s purchases are paid for in the month ofpurchase; the remainder is paid for in the following month. Allcredit sales are due (without discount), with no discount, in15days. Based on history, Bling, Inc. has found, that only 20% of amonth’s sales are collected in the month of sale. 70% is collectedin the following month, and the remaining 10% is collected in thesecond month following sale. Bad debts have been immaterial and canbe ignored.

Monthly operating expenses for the company are given below:

Variable:
Sales commissions		4%	of sales
Fixed:
Advertising	$	300,000
Rent	$	28,000
Salaries	$	126,000
Utilities	$	12,000
Insurance	$	4,000
Depreciation	$	24,000

Insurance is paid in November of each year and covers a 12 monthperiod.

The company expects to buy $21,000in new, better equipment in May and $50,000 in new equipment inJune. The new equipment purchases in both months will be paid incash. The company declares dividends of $22,500 each quarter,payable in the first month of the following quarter.

A listing of Bling, Inc.’saccounts as of March 31 is given below:

Assets
Cash	$	84,000
Accounts receivable ($44,800 February sales;   $537,600 March sales)		582,400
Inventory		134,000
Prepaid insurance		26,000
Property and equipment (net)		1,050,000
Total assets	$	1,876,400
Liabilities and Stockholders’ Equity
Accounts payable	$	110,000
Dividends payable		22,500
Common stock		1,000,000
Retained earnings		743,900
Total liabilities and stockholders’ equity	$	1,876,400

Bling, Inc. will always maintain aminimum cash amount of $60,000. All borrowing is always done at thebeginning of a month; all repayments (if any and able) are made atthe end of the month.

The company can borrow inincrements of $1,000 at the beginning of each month. The interestrate is 1% per month (assume no compounding interest). At the endof the quarter, the company would pay the bank all of theaccumulated interest on the loan and as much of the loan aspossible (in increments of $1,000), while maintaining their minimumcash balance.

Required: YOUR FINAL WORK MUST BE TYPED AND YOU SHOULDUSE EXCEL/LINKED FORMULAS. TEAMS OF UP TO 3 STUDENTS ARE PERMITTED.You must submit your work, HARD COPY, at the beginning of CLASS andone member of your team must upload the file to course web. Thefile name must be the last names of each group member (5 pointdeduction if not). 10 points will be DEDUCTED if the documents arenot easily readable and formatted professionally [40points].

1.

Prepare a master budget for the three-month period ending June30. Include the following detailed budgets: A sales budget, by month and in total for the quarter. A schedule of expected cash collections from sales, by month andin total for the quarter. A merchandise purchase budget in units and dollars. Show thebudget by month and in total for the quarter (round unit cost ofpurchases to 1 decimal point). A schedule of expected cash disbursements for purchases by monthand in total for the quarter. 2. A cash budget. Show the budget by month and in total for thequarter. You must show disbursements separately for partial creditif totals are incorrect. For example, merchandise, advertising,rent etc. 3. A budgeted income statement for the three-month period endingJune 30 (Use the internal approach for reporting). 4. A budgeted balance sheet as of June 30th in good form.