Prepare a master budget for the next three months, starting April 1. The necklaces are sold to retailers for $10 each. Recent and forecasted sales in units are as follows:

The large buildup in sales before and during May is due to Mothers Day. Ending inventories should be equal to 40% of the next months 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 months 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 companys monthly selling and administrative expenses are given below:

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 $23,200 in new equipment during May and $58,000 in new equipment during June; both purchases will be paid in cash. The company declares dividends of $18,600 each quarter, payable in the first month of the following quarter. The companys balance sheet at March 31 is given below:

Assets
Cash						$ 92,000
Accounts receivable ($44,000 February sales;
$456,000 March sales)						500,000
Inventory						132,800
Prepaid insurance						46,200
Fixed assets net of depreciation						1,040,000
Total assets						$ 1,811,000
Liabilities and Shareholders' Equity
Accounts payable						$ 134,800
Dividends payable						18,600
Common shares						980,000
Retained earnings						677,600
Total liabilities and shareholders' equity						$ 1,811,000

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

An income statement and budgeted balance sheet as of June 30.

January (actual) February (actual) March (actual) April May 29,000 44,000 57,000 83,000 117,000 June July August September 68,000 48,000 46,000 43,000 496 of sales Variable: Sales commissions Fixed: Advertising Rent Wages and salaries Utilities Insurance Depreciation $ 254,000 $ 27,000 $ 127,600 $ 14,200 6,600 $ 32,000