1. Prepare a sales budget for January through May. The selling price per unit is $40.00. The...

Question:

1. Prepare a sales budget for January through May. The selling price per unit is $40.00. The budgeted sales for December is $50,000. January is $40,000. February is 50,000. March is $50,000. And April is $80,000.
2. Prepare a purchases budget for January through March, and the first quarter in total. Assume that the company only sells one product that can be purchased at $15.00 per unit. The market for this product is very competitive and customers highly value service such as quality and on time delivery of the product. Also assume that currently it is company policy that should equal 50% of next month's projected sales.
3. Prepare a for January through March and for the first quarter in total. The company maintains a minimum cash balance of $50,000.00, and this was the balance in the cash account on January 1. Past experience shows that 30% of sales are collected in the month of the sale, and 70% in the month following the sale. Labor cost is $15 per unit. Other expenses include $17,000 per month for rent, $4,000 for advertising, and $6,000 per month for depreciation. All costs are paid in the current month except inventory purchases, which are paid in the month following purchase (i.e. January purchases are paid in February). On January 1stthere was an outstanding balance of $100,000. The company has an open with a bank and can borrow at an annual rate of 12%. For simplification assume that all loans are made at the beginning of the month and repayments are made at the end, and interest is only paid at the time when repayment is made. Additionally, all loans and repayments (not the interest portion) can only be made in increments of $1000 and the company would like to pay its debts, or a portion thereof, as soon as it has enough cash to do so.
4. Finally, prepare the Budgeted Income Statement based on the information given above.
5. Repeat steps 2-4 for budget scenarios B and C using the following Desired assumptions: B. 90% and C. 3% .
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