Question

Case 1 - Budgeting Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression on the president and have assembled the information below The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows 58,000 January (actual)24,000 June February (actual) 34,000 July March (actual) 47,000 August 36,000 April May 38,000 73,000 September 33,000 107,000 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next month's sales in units. The necklaces cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however that only 20% of a month's sales are collected by month-end. 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. The company's monthly selling and administrative expenses are given below: Variable: Sales commissions 4 % of sales Fixed: Advertising 224,000 22,000 Rent

please help me with cash budget!!

Answer 1

A. Sales budget
					($)
		April	May	June	Total Quarter
Units		73,000	107,000	58,000	238,000
Rate	$10
Total Sales Value		730,000	1,070,000	580,000	2,380,000
					($)
B. Cash Collection from Sales		April	May	June	Total Quarter
February sales on account:
Collected in April ( 10% of 340,000)		34,000			34,000
March sales on account:
Collected in April (70% of 470,000)		329,000			329,000
Collected in May (10% of 470,000)			47,000		47,000
April sales on account:
Collected in April (20 % of 730,000)		146,000			146,000
Collected in May (70 % of 730,000)			511,000		511,000
Collected in June (10 % of 730,000)				73,000	73,000
May sales on account:
Collected in May (20 % of 1,070,000)			214,000		214,000
Collected in June (70 % of 1,070,000)				749,000	749,000
June sales on account:
Collected in June (20 % of2,380,000)				116,000	116,000
		509,000	772,000	938,000	2,219,000
C. Merchandise Purchase Budget
Desired Closing Inventory ( in Units)
March (73,000 * 40%)		29200
April (40% of May sales , 107,000)		42800
May (40% of June sales , 58,000)		23200
June (40% of July sales , 38,000)		15200
		April	May	June	Total Quarter
Desired Closing Stock (Units)		42,800	23,200	15,200	15,200
Budgeted Sales	(Units)	73,000	107,000	58,000	238,000
Less : Opening Stock	(Units)	29,200	42,800	23,200	29,200
Budgeted Purchases (Units)		86,600	87,400	50,000	224,000
Cost per Unit	$4
Budgeted Purchases ($)		346,400	349,600	200,000	896,000
D. Schedule of payments for Merchandise Purchase Budget
					($)
		April	May	June	Total Quarter
March Purchases on account:
Payment in April		114,800			114,800
April Purchases on account:
Payment in April (50% of 346,400)		173,200			173,200
Payment in May (50% of 346,400)			173,200		173,200
May Purchases on account:
Payment in May (50% of 349,600)			174,800		174,800
Payment in June (50% of 349,600)				174,800	174,800
June Purchases on account:
Payment in June (50% of 200,000)				100,000	100,000
Total		288,000	348,000	274,800	910,800