Please do parts 2, 3, and 4. The answer for May borrowings is not 10,534 or 10,550.

1 Knockoffs Unlimited, a nationwide distributor of low-cost imitation designer necklaces, has an exclusive franchise on the distribution of the necklaces, and sales have grown so rapidly over the past few years that it has become necessary to add new members to the management team. To date, the company's budgeting practices have been inferior, and at times the company has experienced a cash shortage. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three months, starting April 1. You are eager to make a favourable impression the president and have assembled the information below. 100 points The necklaces are sold to retailers for $10 each. Recent and forecast sales in units are as follows: eBook Print References January (actual) February (actual) March (actual) April May 28,500 43,000 56,000 82,000 116,000 June July August September 67,000 47,000 45,000 42,000 The large buildup in sales before and during May is due to Mother's Day. Ending inventories should be equal to 40% of the next month's sales in units. The necklaces cost the company $4 each. Purchases are paid for as follows: 50% in the month of purchase and the remaining 50% in the following month. All sales are on credit, with no discount, and payable within 15 days. The company has found, however, that only 20% of a month's sales are collected by month-end. An additional 70% is collected in the following month, and the remaining 10% is collected in the second month following sale. Bad debts have been negligible. The company's monthly selling and administrative expenses are given below: 4% of sales Variable: Sales commissions Fixed: Advertising Rent $251,000 26.500 The company's monthly selling and administrative expenses are given below: 4% of sales Variable: Sales commissions Fixed: Advertising Rent Wages and salaries Utilities Insurance Depreciation $251,000 26,500 126,400 13,800 6,400 31,000 All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance. Insurance is paid on an annual basis, in November of each year. The company plans to purchase $22,800 in new equipment during May and $57,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,400 each quarter, payable in the first month of the following quarter. The company's balance sheet at March 31 is given below: 91,000 Assets Cash Accounts receivable ($43,000 February sales; $448,000 March sales) Inventory Prepaid insurance Fixed assets, net of depreciation Total assets Liabilities and Shareholders' Equity Accounts payable Dividends payable Common shares Retained earnings Total liabilities and shareholders' equity 491,000 131,200 44,800 1,035,000 $1,793,000 $ 132,800 18,400 970,000 671,800 $1,793,000 The company wants a minimum ending cash balance each month of $50,000. All borrowing is done at the beginning of the month, with any repayments made at the end of the month. The interest rate on these loans is 1% per month and must be paid at the end of each month based on the outstanding loan balance for that month. Required: 1. Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: a. A sales budget by month and in total. Quarter Sales budget Budgeted sales in units Selling price per unit Total sales April 82,000 $ 10 $ $ 820,000 $ May 116,000 10 $ 1,160,000 $ June 67,000 10 $ 670,000 $ 265,000 10 2,650,000 b. A schedule of expected cash collections from sales, by month and in total. February sales March sales April sales May sales June sales Total cash collections KNOCKOFFS UNLIMITED Schedule of Expected Cash Collections April May June Quarter $ 43,000 $ 0 $ 0 $ 43,000 392,000 56,000 0 448,000 164,000 574,000 82,000 820,000 0 232,000 812,000 1,044,000 0 0 134,000 134,000 599,000 $ 862,000 $ 1,028,000 $ 2,489,000 $ c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. Budgeted sales in units Add: Budgeted ending inventory Total needs Less: Beginning inventory Required unit purchases Unit cost Required dollar purchases KNOCKOFFS UNLIMITED Merchandise Purchases Budget April May 82,000 116,000 46,400 26,800 128,400 142,800 32,800 46,400 95,600 96,400 $ 4 $ 4 $ $ 382,400 $ 385,600 $ June Quarter 67,000 265,000 18,800 18,800 85,800 283,800 26,800 32,800 59,000 251,000 4 $ 4 236,000 $ 1,004,000 d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. June 01 $ March purchases April purchases May purchases June purchases Total cash disbursements KNOCKOFFS UNLIMITED Schedule of Expected Cash Disbursements April May $ 132,800 $ 0 $ 191,200 191,200 0 192,800 0 0 $ 324,000 $ 384,000 $ 0 192,800 118,000 310,800 $ Quarter 132,800 382,400 385,600 118,000 1,018,800 2. A cash budget. Show the budget by month and in total. (Round your intermediate calculations and final answers to the nearest whole dollar. Also, round down your interest calculations to the next whole dollar amount. Cash deficiency, repayments and interest should be indicated by a minus sign. Do not leave any empty spaces; input a 0 wherever it is required.) June Quarter 50,000 $ 91,000 1,028,000 2,489.000 1,078,000 2,580,000 KNOCKOFFS UNLIMITED Cash Budget For the Three Months Ending June 30 April May Cash balance, beginning $ 91,000 $ 50,000 $ Add receipts from customers 599,000 862.000 Total cash available 690,000 912,000 Less disbursements: Purchase of inventory 324.000 384.000 Advertising 251,000 251,000 Rent 26,500 26,500 Salaries and wages 126,400 126,400 Sales commissions 32,800 46,400 Utilities 13,800 13,800 Dividends paid 18,400 01 Equipment purchases 0 22,800 Total disbursements 792,900 870,900 Excess deficiency) of receipts over disbursements (102,900) 41,100 Financing Borrowings 154,444 Repayments 0 Interest (1,544) Total financing 152.900 Cash balance, ending $ 50,000 $ 41,100 $ 310,800 251,000 26,500 126,400 26,800 13,800 0 1,018,800 753,000 79,500 379.200 106,000 41,400 18,400 79,800 2,476,100 103,900 57,000 812,300 265,700 0 0 265.700 $ 103,900 3. A budgeted income statement for the three-month period ending June 30. Use the variable costing approach. $ 2,650,000 KNOCKOFFS UNLIMITED Budgeted Income Statement For the Three Months Ended June 30 Sales revenue Variable expenses: Cost of goods sold $ 1,060,000 Commissions 106,000 Contribution margin Fixed expenses Advertising 753,000 Rent 79,500 Wages and salaries 379,200 Utilities 41,400 Insurance 19,200 Depreciation 93,000 0 1,166,000 1,484,000 0 1,365,300 118,700 Operating income Less interest expense Net income $ 118,700 4. A budgeted balance sheet as of June 30. KNOCKOFFS UNLIMITED Budgeted Balance Sheet June 30 Assets Cash Accounts receivable 652,000 Inventory 75,200 Prepaid insurance 25,600 Fixed assets, net of depreciation 1,021,800 ol Total assets $ 1,774,600 Liabilities and Shareholders' Equity Accounts payable, purchases $ 118,000 Dividends payable 18,400 Common shares 970,000 Retained earnings 0 0 Total liabilities and shareholders' equity $ 1,106,400