aster Case 8-33 Master Budget with Supporting Schedules (L08-2, LO8-4, L08-8, LO
ID: 2580408 • Letter: A
Question
aster Case 8-33 Master Budget with Supporting Schedules (L08-2, LO8-4, L08-8, LO8-9, LO8-10) You have just been hired as a new management trainee by Earrings Unlimited.a distributor of earrings to vanous retait outlets located 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 The company sells many styles of earrings, but all are sold for the same price- $14 months and budgeted sales for the next six months follow (in pairs of earrings per pair Actual sales of earrings for the last three tactuai2 20, 800 June (budget) so,800 (actua1) February (actual) March (actual) 40,800 August (budget) 28, 800 26,800 July (budgeb) 30,800 April (budget) 6s, 800 September May (budget) 100,800 (budget) 25, 800 The concentration of sales befor month to supply 40% of the earrings sold in the following month. e and during May is due to Mother's Day, Sufficient inventory should be on hand at the end of each Suppliers are paid $4.40 for a pair of earrings. One-half of a month's paid for in the following month. All sales are on credit. Only 20% of a month's sales are colected i the month of sale An additional 70% is collected in thefollowi ng month, and the remaining 10% is collected in the Monthly operating expenses for the c are given below Variable: Sales Fixed: commissions salesExplanation / Answer
Required budgets are as prepared below:
1a Earings unlimited Sales Budget For the quarter ended June 30 Month Particulars April May June Total Budgeted Unit sales 65,800 100,800 50,800 217,400 Sale Price 14 14 14 14 Budgeted sales 921,200 1,411,200 711,200 3,043,600 1b. Earings unlimited Schedule of expected Cash collections For the quarter ended June 30 Month Particulars April May June Total Beginning Accounts Receivable February sales (26,800*14*10%) 37,520 37,520 March sales (40,800*14*70%) 399,840 399,840 March sales (40,800*14*10%) 57,120 57,120 April Credit Sales 184,240 644,840 92,120 921,200 May Credit Sales 282,240 987,840 1,270,080 June Credit sales 142,240 142,240 Total collections 621,600 984,200 1,222,200 2,828,000 Account receivable for June Sale 568,960 Account receivable for May Sale 141,120 1c. Earings unlimited Merchandise Purchase Budget For the quarter ended June 30 Month Particulars April May June Total july Budgeted Unit Sales 65,800 100,800 50,800 217,400 30,800 Add: Desired Ending merchandise inventory (40% of next month sales) 40,320 20,320 12,320 12,320 Total needs 106,120 121,120 63,120 229,720 Less: beginning merchandise inventory 26,320 40,320 20,320 26,320 Required purchase 79,800 80,800 42,800 203,400 Unit Cost 4.4 4.4 4.4 4.4 Required dollar purchases $351,120 $355,520 $188,320 $894,960 1d. Earings unlimited Schedule of expected Cash payments For the quarter ended June 30 Month Particulars April May June Total Beginning Accounts Payable (a) $104,000 $104,000 April Purchases (b) $175,560 $175,560 $351,120 May Purchases (c ) $177,760 $177,760 $355,520 June Purchases (d) $94,160 $94,160 $94,160 Total payments (a+b+c+d) $279,560 $353,320 $271,920 $904,800 Earings unlimited Commission For the quarter ended June 30 Month Particulars April May June Total Budgeted Unit sales 65,800 100,800 50,800 217,400 Sale Price 14 14 14 14 Budgeted sales 921,200 1,411,200 711,200 3,043,600 Sales commisssions (4% of sales) 36,848 56,448 28,448 121,744 2 Earings unlimited Cash Budget For the quarter ended June 30 Month Particulars April May June Total Beginning Cash balance 78,000 54,192 150,884 78,000 Add: Collection from customers $621,600 $984,200 $1,222,200 $2,828,000 cash available for use $699,600 $1,038,392 $1,373,084 $2,906,000 Less: cash Disbursements Merchandise purchase $279,560 $353,320 $271,920 904,800 Advertising 240,000 240,000 240,000 720,000 Rent 22,000 22,000 22,000 66,000 Salaries 114,000 114,000 114,000 342,000 Commissions 36,848 56,448 28,448 121,744 Utilities 9,000 9,000 9,000 27,000 Equipment purchase 18,000 44,000 62,000 Dividend paid 18,000 18000 Total disbusrement 719,408 812,768 729,368 2,261,544 Cash surplus/Deficit -19,808 225,624 643,716 644,456 Financing Borrowing 74,000 74,000 Repayment -74,000 -74,000 Interest -740 -740 Net cash from Financing 74,000 -74,740 -740 Budgeted ending cash balance 54,192 150,884 643,716 643,716 Earings Unlimited Budgeted Income Statement For the three month ended June 30 Particulars Amount ($) Amount ($) Sales 3,043,600 Less: Cost of goods sold (217,400*4.4) 956,560 Variable expenses: Commissions 121,744 Interest expense 740 Insurance (3,400*3) 10,200 132,684 Contribution Margin 1,954,356 Fixed Expenses: Advertising 720,000 Rent 66,000 Salaries 342,000 Depreciation (18,000*3) 54,000 Utilities 27,000 1,209,000 Net operating Income 745,356 Dividend Paid 18,000 Net Income 727,356 Earings Unlimited Budgeted balance Sheet Jun-30 Assets Cash 643,716 Accounts Receivable 710,080 Inventory (12,320*4.4) 54,208 Property and equipment Net (990,000+18,000+44,000-54,000) 998,000 Prepaid insurance (23,000-10,200) 12,800 Total assets 2,418,804 Liabilities and Stockholders' Equity Accounts Payable purchases 94,160 Dividend payable 18,000 Common Stock 880,000 Retained earnings (699,288+727,356) 1,426,644 Total liabilities and stockholders' equity 2,418,804Related Questions
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