Question

Answer 1

1 a) Sales Budget is shown as follows:- (Amounts in $)

Sales Budget
	April	May	June	Quarter
Budgeted units sold (A)	67,400	102,400	52,400	222,200
Selling price per unit (B)	$16	$16	$16	$16
Budgeted Sales (A*B)	1,078,400	1,638,400	838,400	3,555,200

b) Schedule of Expected Cash Collections (Amounts in $)

Earrings Unlimited
Schedule of Expected Cash Collections
	April	May	June	Quarter
February Sales (10% in April)	45,440 (28,400*$16*10%)	0	0	45,440
March Sales (70% in April and 10% in May)	474,880 (42,400*$16*70%)	67,840 (42,400*$16*10%)	0	542,720
April Sales (20% in Apr, 70% in May & 10% in Jun)	215,680 (1,078,400*20%)	754,880 (1,078,400*70%)	107,840 (1,078,400*10%)	1,078,400
May Sales (20% in May, 70% in Jun & 10% in Jul)	0	327,680 (1,638,400*20%)	1,146,880 (1,638,400*70%)	1,474,560
June Sales (20% in Jun, 70% in Jul & 10% in Aug)	0	0	167,680 (838,400*20%)	167,680
Total Cash Collected	736,000	1,150,400	1,422,400	3,308,800

c) Merchandise Purchases Budget is shown as follows:-

Earrings Unlimited
Merchandise Purchases Budget
	April	May	June	Quarter
Budgeted units sales	67,400	102,400	52,400	222,200
Desired Ending Inventory (40% of next month sales)	40,960	20,960	12,960 (32,400*40%)	12,960
Total needs	108,360	123,360	65,360	235,160
Beginning Inventory	(26,960)(67,400*40%)	(40,960)	(20,960)	(26,960)
Required Purchases (in units) (C)	81,400	82,400	44,400	208,200
Unit Cost (D)	$5.20	$5.20	$5.20	$5.20
Required dollar purchases (C*D)	$423,280	$428,480	$230,880	1,082,640

d) Budgeted Cash Disbursements for Merchandise Purchases (Amounts in $)

Earrings Unlimited
Budgeted Cash Disbursements for Merchandise Purchases
	April	May	June	Quarter
Accounts Payable	112,000	0	0	112,000
April Purchases (50% in Apr and 50% in May)	211,640 (423,280*50%)	211,640 (423,280*50%)	0	423,280
May Purchases (50% in May and 50% in Jun)	0	214,240 (428,480*50%)	214,240 (428,480*50%)	428,480
June Purchases (50% in Jun and 50% in Jul)	0	0	115,440 (230,880*50%)	115,440
Total Cash Disbursements	323,640	425,880	329,680	1,079,200