PRATAPSINGH 433 5 457 Class: 13L Course: ACCT 27 Introduction to Managerial Accounting Dated: October 29, 2022 You have just hired as a management trainee by Alpha Fashions, a nationwide distributor of a designer's silk ties. The company has an exclusive franchise on the distribution of the ties, and sales have been grown so rapidly over the last few years that it has become necessary to add new members to the management team. You have been given responsibility for all planning and budgeting. Your first assignment is to prepare a master budget for the next three (3) months, starting April 1. You are anxious to make a favourable impression on the president and have assembled the information below. The company desires a minimum ending cash balance each month of $10,000. The ties are sold to retailers for $8 each. Recent and forecasted sales in units are as follows: 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 The 36,000 September 32,000 The large buildup in sales 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 purchase and 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 25% of a month's sales are collected by month-end. An additional 50% are collected in the following month, and the remaining 25% are collected in the second month following sale. Bad debts have been negligible. The company's monthly selling and administrative expenses are given below: Variable: Sales Commission $1 per tie Fixed: Wages and salaries the Dude $22,000 Utilities $14,000 the co Insurance $1,200 Depreciation $1,500 Miscellaneous $3,000All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during the month of 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 at March 31 is given below: Assets: Cash $14,000 Account Receivable ($48,000 February sales; $168,000 March sales) $216,000 Inventory (31,500 units) $157,500 Prepaid Insurance $14,400 Fixed assets, net of depreciation $172,700 Total Assets $574,600 Liabilities and Shareholders' Equity Accounts Payable $85,750 Dividend Payable $12,000 Common Shares $300,000 Retained Earnings $176,850 Total liabilities and shareholders' 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 $160,000. 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 as possible (in increment of $1,000), while retaining at least $10,000 in cash. Required: Prepare a master budget for the three-month period ending June 30. Include the following detailed budgets: 1- a. A sales budget by month and in total. (10 marks) b. A schedule of expected cash collection from sales, by month and in total. (10 marks) c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. (10 marks) d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. (10 marks) 2- A cash budget. Show the budget by month and in total (20 marks) 3- A budgeted income statement for the three-month period ending June 30. Use the contribution approach. (20 marks) 4- A budgeted balance sheet as of June 30. (20 marks)