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    amdmak's Avatar
    amdmak Posts: 2, Reputation: 1
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    #1

    Nov 24, 2015, 05:05 PM
    You have just been hired as a management trainee by Dubai Sales Company, a nationwid
    You have just been hired as a management trainee by Dubai Sales Company, a nationwide distributor of a designer’s silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are anxious to make a favorable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $10,000. The ties are sold to retailers for $8 each. Recent and forecasted sales in units are as follows:
    Jan actual 20,000
    Februaryactual 24,000
    Marchactual 28,000
    April 35,000
    May 45,000
    Jun 60,000
    July 40,000
    August 36,000
    Sept 32,000




    The large buildup in sales before and during June is due to Father’s Day. Ending inventories are supposed to equal 90% of the next month’s sales in units. The ties cost the company $5 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 25% of a month’s sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following sale. Bad debts have been negligible. The company’s monthly selling and administrative expenses are given below:
    Variable:
    Sales Commissions $ 1 per tie
    Fixed:
    Wages and Salaries $ 22,000
    Utilities $ 14,000
    Insurance $ 1,200
    Depreciation $ 1,500
    Miscellaneous $ 3,000




    All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $25,000 cash. The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The company’s balance sheet at March 31 is given below:
    ASSETS
    CASH $ 14,000
    A/R ($48000 FEB SALES, $168000 MAR SALES ) $ 216,000
    INVENTORY (31500 UNITS) $ 157,500
    PREPAID INSURANCE $ 14,400
    FIXED ASSETS NET OF DEPRECIATION $ 172,700
    TOTAL ASSETS $ 574,600
    LIABILITY ANS STOCKHOLDERS' EQUITY
    A/P $ 85,750
    DIVIDENDS PAYABLE $ 12,000
    CAPITAL STOCK $ 300,000
    RETAINED EARNINGS $ 176,850
    TOTAL $ 574,600






    The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan as possible (in increments of $1,000), while still retaining at least $10,000 in cash.
    Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:
    1. a. A sales budget by month and in total.
    b. A schedule of expected cash collections from sales, 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.
    2. A cash budget. Show the budget by month and in total.
    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.
    smoothy's Avatar
    smoothy Posts: 25,490, Reputation: 2853
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    #2

    Nov 24, 2015, 05:06 PM
    These are your homework questions... we don't do your assignments so you don't have to.

    Show us your work and what you have for an answer and we can work from there.
    amdmak's Avatar
    amdmak Posts: 2, Reputation: 1
    New Member
     
    #3

    Nov 24, 2015, 05:11 PM
    this what I did and I don't know what to do after it
    Sales budget
    April may June quarter
    35000 45000 60000 = 140000
    selling price per unit is 8
    280000 360000 480000 = 1120000
    paraclete's Avatar
    paraclete Posts: 2,706, Reputation: 173
    Ultra Member
     
    #4

    Nov 25, 2015, 09:30 PM
    The essential elements of the question are;

    The company desires a minimum ending cash balance each month of $10,000

    Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets:
    1. a. A sales budget by month and in total.
    b. A schedule of expected cash collections from sales, 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.
    2. A cash budget. Show the budget by month and in total.
    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.
    You have answered sub question 1(a)

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