XYZ Company is the nationwide distributor of a new brand of designer silk ties. Sales have grown...

XYZ Company is the nationwide distributor of a new brand of designer silk ties. Sales have grown so rapidly of the last few years that it has become necessary to add new members to the management team.

You have been given the responsibility for all of the planning and budgeting for the company. Your first assignment is to prepare a master budget for the next three months, starting April 1.

The following information has been gathered.

The company desires a minimum ending cash balance each month of $10,000.

The ties are sold to retailers for $8 each.

Recent and foretasted sales in units are as follows:

Month Sales in Units January (actual) 20,000 February (actual) 24,000 March (actual) 28,000 April 35,000 May 45,000 June 60,000 July 40,000 August 36,000 September 32,000 The large buildup before and during June is due to Father's Day. Ending inventories are supposed to equal 90% of the next month's sales in units. The ties cost the company $5 each. Purchases are paid for as follows: 50% in the month of the purchase and the remaining 50% in the month following the purchase. All sales are credit sales with no discount and payable within 15 days. The actual payment of sales is that only 25% of the month's sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following the sale. Bad debts have been negligible. The company's monthly selling and administrative expenses are given below: Variable Sales commissions$1 per tie Fixed Wages and salaries$ 22,000 Utilities$ 14,000 Insurance$ 1,200 Depreciation$ 1,500 Miscellaneous$ 3,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and the monthly expired portion of insurance. Land will be purchased during May for $25,000 cash.

The company declares dividends of $12,000 each quarter, payable in the first month of the following quarter. The company's balance sheet as of March 31 is given below: Assets Cash$ 14,000 Accounts receivable ($48,000 February sales; $168,000 March sales) 216,000 Inventory (31,500 units) 157,500 Prepaid insurance14,400 Fixed assets, net of depreciation 172,700 Total assets$ 574,600 Liabilities and Stockholder's Equity Accounts payable$ 85,750 Dividends payable 12,000 Capital stock 300,000 Retained earnings 176,850 Total liabilities and stockholder's equity$ 574,600 The company has an agreement with a bank that allows it to borrow in increments of $1,000 at the beginning of each month, up to a total loan balance of $40,000. The interest rate on these loans is 1% per month, and for simplicity, we will assume that interest is not compounded. At the end of the quarter, the company would pay the bank all of the accumulated interest on the loan and as much of the loan principal as possible ( in increments of $1,000), while still retaining at least a $10,000 month-end cash balance.

Using the information and data on the "GIVEN (ROWS 1 THROUGH 48)" tab prepare a master budget for the three-month period ending June 30. Include the following detailed budgets and schedules:

PART 1 - A sales budget by month and in total for the quarter. (SHOW DETAILED WORK)

PART 2 - A schedule of expected cash collections from sales, by month and in total for the quarter. (SHOW DETAILED WORK)

PART 3 - A merchandise purchases budget in units and in dollars. Show the budget by month and in total for the quarter. (SHOW DETAILED WORK)

PART 4 - A schedule of expected cash disbursements for merchandise purchases, by month and in total for the quarter. (SHOW DETAILED WORK)

PART 5 - A cash budget. Show the budget by month and in total for the quarter. (SHOW DETAILED WORK)

PART 6 - A budgeted income statement for the three-month period ending June 30. Use the contribution approach. (SHOW DETAILED WORK)

PART 7 - A budgeted balance sheet as of June 30. (SHOW DETAILED WORK)