Question

Case #2 You have just been hired as a new management trainee by Earrings Unlimited, a distributor of earrings to various retall outlets 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 points below. The company sells many styles of earrings, but all are sold for the same price-$12 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) 20,480 June (budget) February (actual) 26,488 July (budget) 3e,488 March (actual) 40,400 August (budget) 28,488 April (budget) 65,408 September (budget) 25,480 May (budget) 58,488 180,48e 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 $4.20 for a pair of earrings. One-half of a month's purchases is pald 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 ros 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 Variable: Sales commissions 4% of sales Prev 1of1Hİ Next > O Type here to search

Answer 1

1A .

	Sales	Budget
	April	May	June	Quarter
Budgeted unit sales	65400	100400	50400	216200
Selling price per unit	12	12	12	12
Total sales	784800	1204800	604800	2594400

1B .

	Earings	unlimited
Schedule	of	expected	cash	collections
	April	May	June	Quarter
Feb sales	31680	0	0
Mar sales	339360	48480	0
Apr sales	156960	549360	78480
May sales	0	240960	843360
June sales	0	0	120960
Total cash collection	528000	838800	1042800	2409600

1C .Purchase budget will be :-

	Earrings	unlimited
	Merchandise	purchase	budget
	April	may	june	quarter
Budgeted sales unit	65400	100400	50400
+ Closing inventory	40160	20160	12160
- opening inventory	26160	40160	20160
Purchase unit	79400	80400	42400	202200
Price per unit	4.2	4.2	4.2	4.2
	333480	337680	178080	849240

1D . cash disbursement for pur.

	Earrings	unlimited
Budgeted	cash	disbursement	for merchandise	purchase
	April	may	june	quarter
Accounts payable	102000
Apr	166740	166740
May		168840	168840
June			89040
Total cash payment	268740	335580	257880	862200

Cash budget for quarter ending June

Cash	budget	for three	months ended	30 june
	April	may	June	Quarter
Opening cash balance	76000	52000	132028
Add : collection from customer	528000	838800	1042800	2409600
Total cash available	604000	890800	1174828	2669628
Less : cash disbursement
Merchandise purchase	268740	335580	257880	862200
Advertisement	220000	220000	220000	660000
Rent	20000	20000	20000	60000
Salaries	110000	110000	110000	330000
Commission	31392	31392	31392	103776
Utilities	8000	8000	8000	24000
Equipment purchase	0	17000	42000	59000
Div. Paid	16500	0	0	16500
Loan repaid	0	0	122632	122632
Interest on bank borrowing	0	0	3679	3679
Total cash dis ursement	674632	758772	808383	2241787
Excess/(deficiency) of cash over cash disbursement	(70632)	132028	366445
Financing :
Borrowing	122632	0	0

Required (necessary(4 parts of answer solved. L(ack of time not possible to solve more)