ezto.mheducation.com/hm.tpx?todozc15Si ingleQuestionNo: 1.&postSubmissionView; =

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ezto.mheducation.com/hm.tpx?todozc15Si ingleQuestionNo: 1.&postSubmissionView; = 13252707378067937&wid;=132527073921 95729&role-student;&pid;=23460604… . Award: 50.00 points 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 tor 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 o earringS, but all are sold for the same price--$15 per pair. Actual sales of earrings tor the last three months and budgeted sales tor the next six months follow (in pairs of earrings) January (actual) February (actual) March (actual) April (budget) 22,200 June (budget) 28,200 July (budget) 42,200 August (budget) 67,200 September (budget) 52,200 32,200 30,200 27,200 102,200 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 $5.10 for a pair of earrings. One-half of a month's purchases is paid for in the month of purchase: the other half is 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% is 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 4% of sales Fixed $ 310,000 S 29,000 S 128,000 S 12,500 5 4,100 S 25,000 Rent Utilities Insurance 4:50 PM O Type here to search 3/15/2018

Explanation / Answer

1. Expected Cash Collection' Feb Mar April May June July Quarter No of pair sold 28200 42200 67200 102200 52200 32200 221600 Selling price per pair 15 15 15 15 15 15 15 Total Sale 423000 633000 1008000 1533000 783000 483000 3324000 Sales on Account: (total-cash) 423000 633000 1008000 1533000 783000 483000 3324000 April 20% 126600 201600 306600 156600 664800 May 70% 443100 705600 1073100 2221800 June 10% 42300 63300 100800 206400 Accounts Receivable Balance Total Cash Collection (A+B+C+D+E+F) 687000 1075500 1330500 3093000 2a. Purchases budget Mar April May June July Sale 28200 42200 67200 102200 52200 221600 Add: Ending Inventory 40% of subsequent month Sale Q 16880 26880 40880 20880 12880 Total Needs 45080 69080 108080 123080 65080 Less: Beginning Inventory Closing of last month is beginging 16880 26880 40880 20880 Required Inventory Purchase 52200 81200 82200 44200 2a. Cash Disbursment Schedule April May June July Quarter Beginning Accounts Payable 111000 111000 April Purchase (50% in same & 50% in next month) of Inventory purcase in Part 2a. Cost is 5.1 207060 209610 112710 529380 May Purchase 207060 209610 416670 0 Total Cash Disbursment 318060 416670 322320 1057050 3 Cash Budget April May June Quarter Quarter Beginning Cash Balance 85000 61870 158380 85000 Add: Collection from Customers 687000 1075500 1330500 3093000 Total Cash Available 772000 1137370 1488880 3178000 Less Disbursment -Pur For inventory 318060 416670 322320 1057050 -Sales Commission 4% of sale 40320 61320 31320 132960 -Advertising 310000 310000 310000 930000 -Rent 29000 29000 29000 87000 -Salaries 128000 128000 128000 384000 -Utilities 12500 12500 12500 37500 -Insurance (No Outflow as paid at the time of taking insurance) 0 -Equipment 21500 51000 72500 -Dividend Paid 23250 23250 Total Cash Needs 861130 978990 884140 2724260 Excess/(Deficiency) of cash -89130 158380 604740 453740 Financing: Borrowing (61000 min balance+89130 deficiency) 151000 151000 Repayment 151000 151000 Interest 179000*1%*3months 378 378 Ending Cash Balance 61870 158380 453363 453363 4 Income Statement Sales (unit 221600*15) 3324000 Less: Variable Exp -Purchase (unit 221600*5.1) 1130160 -Sales Commission (4% of sale) 132960 Gross Margin 2060880 Less: Fixed -Advertising 930000 -Rent 87000 -Salaries 384000 -Utilities 37500 -Insurance 12300 -dep (25000 for a month*3 month) 75000 Net operatint Income 535080 Less:Interest 378 Net Income 534703 5 Proforma Balance Sheet Cash 453363 Accounts Receivable (June month sale *80% and May month sale*10%) 779700 Inventory (12880*5.1) 65688 Prepaid Insurance (26500-12300 exp) 14200 Plant Equipment (1060000+21500+51000-Dep75000) 1057500 Total Asset 2370451 Capital Stock 1020000 Dividend Payable 23250 Accounts Payable (44200 unit pur/2*5.1) 112710 Retained Earning (703038+534703NI-23250 Div) 1214491 Total Liabilitys and equity 2370451

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