Question

Case 8-33 Master Budget with Supporting Schedules (LO8-2, LO8-4, LO8-8, LO8-9, LOB-101 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-$16 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow (in pairs of earrings January (actual) February (actual) March (actual) Apr 11 (budget) May (budget) 22, 4ee 28,40 42,408 67,408 102, 4ee June (budget) July (budget) August (budget) September (budget) 52.408 32, 4ee 1.400 27, tee 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 $5.20 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% 15 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. 4% of sales Sales comissions Fixed: Advertising $320.ee

Answer 1

Solution 1a:

Sales Budget - Earrings Unlimited
Particulars	April	May	June	Total
Budgeted Sales units	67400	102400	52400	222200
Selling price per unit	$16.00	$16.00	$16.00	$16.00
Total Sales	$1,078,400.00	$1,638,400.00	$838,400.00	$3,555,200.00

Solution 1b:

Schedule of expected cash collection - Earrings Unlimited
Particulars	April	May	June	Total
Cash received for Feburary Sale	$45,440.00			$45,440.00
Cash received for March Sale	$474,880.00	$67,840.00		$542,720.00
Cash received for April Sale	$215,680.00	$754,880.00	$107,840.00	$1,078,400.00
Cash received for May Sale		$327,680.00	$1,146,880.00	$1,474,560.00
Cash received for June Sale			$167,680.00	$167,680.00
Budgeted Cash Collection	$736,000.00	$1,150,400.00	$1,422,400.00	$3,308,800.00

Solution 1c:

Merchandise Purchase Budget - Earrings Unlimited
Particulars	April	May	June	Total
Sales units	67400	102400	52400	222200
Add: Desired ending inventory (40% of next month sales)	40960	20960	12960	12960
Total needs	108360	123360	65360	235160
Less: Opening Inventory	26960	40960	20960	26960
Estimated purchase for earrings (In pairs)	81400	82400	44400	208200
Cost per pair	$5.20	$5.20	$5.20	$5.20
Budgeted purchases (in dollars)	$423,280.00	$428,480.00	$230,880.00	$1,082,640.00

Solution 1d:

Budgeted Cash disbursement for merchandise purchases - Earrings Unlimited
Particulars	April	May	June	Total
Accounts Payable	$112,000.00			$112,000.00
April Purchases	$211,640.00	$211,640.00		$423,280.00
May Purchases		$214,240.00	$214,240.00	$428,480.00
June Purchases			$115,440.00	$115,440.00
Total cash payments	$323,640.00	$425,880.00	$329,680.00	$1,079,200.00

Note: I have answered first 4 parts of the question as HOMEWORKLIB RULES policy, kindly post separate question for answer of remaining questions.