Question

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 follow (in pairs of earrings): $11 per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months January (actual) February (actual) March (actual) April (budget) May (budget) 20,200 26,200 40,200 65,200 100,200 June (budget) July (budget) August (budget) September (budget) 50,200 30,200 28,200 25 200 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 $4.10 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: 4% of sales Variable: Sales commissions Fixed: Advertising Rent Salaries Utilities Insurance Depreciation $ 210,000 $ 19,000 $ 108,000 $ 7,500 $ 3.100 $ 15,000 A 1122 PM Insurance ienaidnn an annual hasie in November Type here to search 2 /10/2020 O

this question was previously answered wrong. can you please help me find the correct answer. can you please give explanations as to how you arrived at the numbers. thanks so much.

Answer 1

Cash Collections
	April	May	June	Quarter
Sales Units	65200	100200	50200	215600
Sales Price	$                         11	$                          11	$                        11
Sales Amount	$              717,200	$            1,102,200	$             552,200	$ 2,371,600
Cash Collections
February	$                28,820			$        28,820
March	$              309,540	$                  44,220		$     353,760
April	$              143,440	$                502,040	$                71,720	$     717,200
May		$                220,440	$             771,540	$     991,980
June			$             110,440	$     110,440
Total Cash Collections	$              481,800	$                766,700	$             953,700	$ 2,202,200

Working

Cash Collections
	April	May	June	Quarter
Sales Units	65200	100200	50200	215600
Sales Price	$                         11	$                          11	$                        11
Sales Amount	$              717,200	$            1,102,200	$             552,200	$ 2,371,600
Cash Collections
February	=26200*11*10%
March	=40200*11*70%	=40200*11*10%
April	=717200*20%	=717200*70%	=717200*10%
May		=1102200*20%	=1102200*70%
June			=552200*20%
Total Cash Collections	0	0	0

Merchandise Purchase Budget
	April	May	June	Quarter
Sales Units	65200	100200	50200	215600
Ending Inventory	40080	20080	12080	12080
Total Needs	105280	120280	62280	227680
Beginning Inventory	26080	40080	20080	26080
Purchases Units	79200	80200	42200	201600
Purchase Price	$                     4.10	$                       4.10	$                    4.10	$            4.10
Purchase Amount	$              324,720	$                328,820	$             173,020	$     826,560

Ending Inventory working

Ending Inventory

=100200*40%

=50200*40%

=30200*40%

Cash Payments
	April	May	June	Quarter
Cash Payments				$                 -
Accounts Payable	$              101,000			$     101,000
April	$                80,196	$                  80,196		$     160,392
May		$                123,246	$             123,246	$     246,492
June			$                61,746	$        61,746
Total Cash Collections	$              181,196	$                203,442	$             184,992	$     569,630

Working

Cash Payments
	April	May	June
Cash Payments
Accounts Payable	101000
April	=160392*50%	=160392*50%
May		=246492*50%	=246492*50%
June			=123492*50%