Highview Merchandise Company Assumptions Sales in units Percentage Change = 0% A

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Highview Merchandise Company Assumptions Sales in units Percentage Change = 0% ACTUAL         FORECAST Month January February March April May June July August September Units       20,000        24,000      28,000       35,000      45,000      60,000       40,000       36,000       32,000 Other Assumptions Operating expenses Variable: (per unit) Selling price per unit $9.00    Sales commissions $       0.50 Unit cost $5.00    Shipping & handling $       0.40 Fixed: (per month) Ending cash balance (per month) $10,000    Wages and salaries $34,800 Ending inventory as percentage    Rent         7,000 of next month's sales 90%    Utilities 2,400 Percentage of purchases paid in:    Insurance expired 1,000 Current month 60%    Depreciation 2,500 Following month 40%    Other S&A 3,700 Percentage of sales collected in:    Advertising Campaign              -   Current month 30% Following month 50% Second following month 20% New fixed assets purchased in May $25,000 Quarterly dividends $12,000 Line-of-credit annual interest 10% Balance Sheet as of March 31 (Actual) Assets Actual A/R to be collected in: Cash $14,000 April April May Total Accounts Receivable 219,600      43,200    126,000       50,400 219600 Inventory 157,500 Unexpired insurance 14,400 Fixed assets, net of depreciation 172,700 Total Assets $578,200 Liabilities and Stockholder's Equity Accounts payable, purchases $85,750 Dividends payable 12,000 Capital stock, no par 300,000 Retained earnings 180,450 Total liabilities and stockholder's equity $578,200 Highview Merchandise Company Budgets and Schedules Schedule a: Sales budget Check Figures April May June Total Credit sales, 100% $0 $0 $0 $0 $     1,260,000 Schedule b: Cash collections April May June Total Collections from current month $0 $0 $0 $0 Collections from prior month                   -                   -                   -                    - Collections from second prior month                   -                   -                   -                    - Total collections $0 $0 $0 $0 $     1,020,600 Schedule c: Purchases budget in units April May June Total Desired ending inventory 0 0 0 0 Plus goods sold                   -                   -                   -                    - Total needed                   -                   -                   -                    - Less beginning inventory                   -                   -                   -                    - Total purchases 0 0 0 0           144,500 Schedule d: Purchases budget (dollars) April May June Total Desired ending inventory $0 $0 $0 $0 Plus cost of goods sold                   -                   -                   -                    - Total needed                   -                   -                   - $0 Less beginning inventory                   -                   -                   -                    - Total purchases $0 $0 $0 $0 $        722,500 Schedule e: Cash pmts for purchases April May June Total From accounts payable (3/31) $0 $0 $0 $0 April                   -                   -                   -                    - May                   -                   -                   -                    - June                   -                   -                   -                    - Total payments $0 $0 $0 $0 $        724,250 Highview Merchandise Company Assumptions Sales in units Percentage Change = 0% ACTUAL         FORECAST Month January February March April May June July August September Units       20,000        24,000      28,000       35,000      45,000      60,000       40,000       36,000       32,000 Other Assumptions Operating expenses Variable: (per unit) Selling price per unit $9.00    Sales commissions $       0.50 Unit cost $5.00    Shipping & handling $       0.40 Fixed: (per month) Ending cash balance (per month) $10,000    Wages and salaries $34,800 Ending inventory as percentage    Rent         7,000 of next month's sales 90%    Utilities 2,400 Percentage of purchases paid in:    Insurance expired 1,000 Current month 60%    Depreciation 2,500 Following month 40%    Other S&A 3,700 Percentage of sales collected in:    Advertising Campaign              -   Current month 30% Following month 50% Second following month 20% New fixed assets purchased in May $25,000 Quarterly dividends $12,000 Line-of-credit annual interest 10% Balance Sheet as of March 31 (Actual) Assets Actual A/R to be collected in: Cash $14,000 April April May Total Accounts Receivable 219,600      43,200    126,000       50,400 219600 Inventory 157,500 Unexpired insurance 14,400 Fixed assets, net of depreciation 172,700 Total Assets $578,200 Liabilities and Stockholder's Equity Accounts payable, purchases $85,750 Dividends payable 12,000 Capital stock, no par 300,000 Retained earnings 180,450 Total liabilities and stockholder's equity $578,200 Highview Merchandise Company Budgets and Schedules Schedule a: Sales budget Check Figures April May June Total Credit sales, 100% $0 $0 $0 $0 $     1,260,000 Schedule b: Cash collections April May June Total Collections from current month $0 $0 $0 $0 Collections from prior month                   -                   -                   -                    - Collections from second prior month                   -                   -                   -                    - Total collections $0 $0 $0 $0 $     1,020,600 Schedule c: Purchases budget in units April May June Total Desired ending inventory 0 0 0 0 Plus goods sold                   -                   -                   -                    - Total needed                   -                   -                   -                    - Less beginning inventory                   -                   -                   -                    - Total purchases 0 0 0 0           144,500 Schedule d: Purchases budget (dollars) April May June Total Desired ending inventory $0 $0 $0 $0 Plus cost of goods sold                   -                   -                   -                    - Total needed                   -                   -                   - $0 Less beginning inventory                   -                   -                   -                    - Total purchases $0 $0 $0 $0 $        722,500 Schedule e: Cash pmts for purchases April May June Total From accounts payable (3/31) $0 $0 $0 $0 April                   -                   -                   -                    - May                   -                   -                   -                    - June                   -                   -                   -                    - Total payments $0 $0 $0 $0 $        724,250

Explanation / Answer

Budget and schedules are checked as shown below:

Highview Merchandise Company Budgets and Schedules Schedule a: Sales budget Check Figures April May June Total Sales in units 35,000 45,000 60,000 1,40,000 Selling Price 9 9 9 9 Credit sales, 100% 315000 405000 540000 1260000 $     1,260,000 Schedule b: Cash collections April May June Total Collections from current month 94500 121500 162000 378000 Collections from prior month 126000 157500 202500 486000 Collections from second prior month 43200 50400 63000 156600 Total collections 263700 329400 427500 1020600 $     1,020,600 Schedule c: Purchases budget in units April May June Total Desired ending inventory 40500 54000 36000 130500 Plus goods sold 35,000 45,000 60,000 1,40,000 Total needed 75,500 99,000 96,000 2,70,500 Less beginning inventory 31500 40500 54000 126000 Total purchases 44,000 58,500 42,000 1,44,500           144,500 Schedule d: Purchases budget (dollars) April May June Total Desired ending inventory 202500 270000 1,80,000 652500 Plus cost of goods sold 175000 225000 300000 700000 Total needed 377500 495000 480000 1352500 Less beginning inventory 157500 202500 270000 630000 Total purchases 220000 292500 210000 722500 $        722,500 Schedule e: Cash pmts for purchases April May June Total From accounts payable (3/31) 85,750 0 0 85,750 April 132000 88000 0 2,20,000 May 0 175500 117000 2,92,500 June 0 0 126000 1,26,000 Total payments 2,17,750 2,63,500 2,43,000 7,24,250 $        724,250

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