Question

...) Oxford, Inc., is preparing its master budget for the quarter ended June 30. It sells a single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. At March 31. the balance in accounts receivable is $12,000, which represents the uncollected balance on March sales, Budgeted sales for the next four months follow: Sales in Units .......... April 800 May 1,000 June 600 July 1,200 The product cost is $20 per unit, and desired ending inventory is 60% of the following month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in the month of purchase and 50% in the following month. At March 31, the balance in accounts payable is $11,000, which represents the unpaid purchases from March. Operating expenses are paid in the month incurred and consist of: Commissions (10% of sales) - Shipping (3% of sales) Office salaries ($3,000 per month) Rent ($5,000 per month) Depreciation is $2,000 per month. Income taxes are 40%, and will be paid on July 1. There are no taxes payable at March 31. A minimum cash balance of $12,000 is required, and the beginning cash balance is $12,000. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month end. If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At March 31, the loan balance is $2,000. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of April, May, and June that includes the: - Sales budget Schedule of cash receipts Merchandise purchases budget Schedule of cash disbursements for purchases of merchandise Schedule of cash disbursements for selling and administrative expenses - Cash budget, including information on the loan balance

Please prepare the master budget, but please use template i provided. The template is the last 3 pages i attached and the steps are numbered.The first page is the actual question. Thank you

Answer 1

1200 nog Master budget for period 1. Sales budget I 2 3 4 Projected unil sales 800 1000 600 1200 $40 xselling price penunit $40 $40 $40 projected Sales (3) 32,000 40,000 24,000 48000 2 Period 2. Purchases budget s 2 3 Next period's unit sales 1000 600 60% X Ending inventory % 60%. = Desired ending inventory 600 based on sales de + Safety stock (Note) do o = Desired ending inventory 720 600 600 + current period's unit sales 800 2 units to be available 1400 1360 1320 - Beginning inventory (480) (60o) (360) = units to be purchased 920 760 960 x Budgeted cost per unit $20 $20 $20 e projected Purchases $18,400 $15200 $19200 Note: No safety stock details given 720 360

wget cost al goods sold Period Current period's unit sales ellods unit sales 800 x Budgeted cost per unit $20 - Projected cost of goods $16000 1000 $20 $20000 600 $20 $12000 3. selling expense budgets pericol 2 40,000 13% 4160 5200 Budget sales(8) 32,000 24,000 X Variable costs (7)(10+5) 13% 137. z variable seling expenses 4160 5200 3120 + fixed selling expenses en 8000 8000 (Salaries trent) (Nole) - projected selling expenses + 100 3200. 9. General and Administrative expense budget: G&A expense 1 (Salaries) 3000 3000 3000 G&A expense 2 (Rent) 5000 5000 5000 GEA expense 3 (Income tax) o o o 0 0 Interest expense (Note) 0 - projected cash G&A expenses 8000 8000 8000 Depreciation expense 2000 2000 2000 projected GEA expenses 10,000 10,000 10,000 . (role)

IS. Expected cash receipts from customers! Period 40,000 12,800 52,800 24,000 16,000 40,000 24,000 14400 25,600 of Sales 24,800 Budgeted scules 32,000 (Ending All receivable 12,000 the opening for the period (Note) 44,000 Cash receipts Cash Sales (com) 19200 Collection of Meceivables 12,800 Month of Sale o ist month attes sale of 12800 2nd month attersale - 3 month after sale Total cash to be collected 31200 balance) 12,800 16000 16,000 4600 310 by 36800 30,400 6. Expected cash payments to suppliers: 0 12 Month of purchase 9200 7000 9600 (18,400x50%) (15, 200x50%.) (19,200X50%) 1 ist month after purchase 11,000 9200 ? 7600 Imatch bou) (Period i) (period 2) and month after purchase - - Total cash payments. 20,200 16,800 17200

Calh budget 1 3 8,000 revod 2 Beginning cash Doo 12,000 15,588 Add cash receipts 31200 36800 30400 Cash Available (A) 43,200 48,800 45988 cash payments Menchandise (Scho) 20,200 16,800 17,200 Selling cupenses (sch.3) 4,160 5,200 3,120 Admin exp excl. Interest (sch.u) Interest Esch.4) Dividends capital exp Interest, short term 34832 (Note) (2000x11.) (2000 +1180 Total cash payments (B) 34,380 30,032 28,320 (C) → Preliminary balance (AB) 10,820 18,768 17,668 Excess (shontfaul) o Borrowing 1180 0 0 (12000-100) Repayment to 3,180 0 Tolel tinancing (D) 1180 3,180 (6) - Ending cash balance. 12,000 15,588 17,668 20 x 1%

Note: No tixed selling expense given (sch.3) - Income tax will be paid in July. Thus, no amount recorded in the budget (sch.4) Interest expense on loon taken to maintain minimum cash balance is assumed to be o will be short term because it is repayed as and when cash available. - No interest esp on long term notes (sch.4) → Ending account receivable in schedules is nothing but opening receivable for that Period Interest (short term) on period 2 in schedule 7 rounded off to nearest dollar