Bargain Mart is formulating its budget for the third quarter of the coming year. Revenue estimates are $800,000 for July, $1,200,000 for August, and $1,000,000 for September. While markups on individual items vary, management estimates that the average selling price exceeds the average purchase cost by 25% (e.g., Bargain Mart expects to generate revenue of $125 on an item purchased for $100). In terms of inventory, Bargain
Mart targets to have merchandise on hand equal to 30% of the following month's cost of goods sold. In addition to the cost of goods purchased, Bargain Mart budgets 60 hours of labor, at a cost of $12.50 per hour, for every $16,000 of revenue. Bargain Mart's supervisory staff costs $28,000 per month, and rent and utilities amount to $35,000 per month. Other expenses equal 5% of the current month's revenue, with $10,000 of this total representing non-cash depreciation on storage racks.
Assume Bargain Mart collects 80% of its revenue in the month of sale and the remainder in the following month. Bargain Mart pays for 60% of its purchases in the month of purchase and the remainder in the following month. Bargain Mart also expects to buy Problems 305 and pay for some new display units, costing $40,000, in August. Finally, Bargain Mart expects to begin August with a cash balance of $85,000.
Required:
a. What is Bargain Mart's purchases budget for August?
b. What is Bargain Mart's direct labor budget for August?
c. What is Bargain Mart's budgeted income statement for August?
d. What is Bargain Mart's cash budget for August?