COURSE PROJECT 1 INSTRUCTIONS You have just been contracted as a new management

COURSE PROJECT 1 INSTRUCTIONS You have just been contracted as a new management trainee by Earrings Unlimited, a distributor of earrings to various retail outlets across the country. In the past, the company has done very little in the way of budgeting and at certain times of the year has experienced a shortage of cash. Since you are well trained in budgeting, you have decided to prepare a master budget for the upcoming second quarter. To this end, you have worked with accounting and other areas to gather the information assembled below. The company sells many styles of earrings, but all are sold for the same price – $10per pair. Actual sales of earrings for the last three months and budgeted sales for the next six months follow: January (actual) 20,000 February (actual) 26,000 March (actual) 40,000 April (budget) 65,000 May (budget) 100,000 June (budget) 50,000 July (budget) 30,000 August (budget) 28,000 September (budget) 25,000 The concentration of sales before and during May is due to Motherโ€™s Day. Sufficient inventory should be on hand at the end of each month to supply 40% of the earrings sold in the following month. Suppliers are paid $4 for each earring. One-half of a month's purchases is paid for in the month of purchase; the other half is paid for in the following month. All sales are on credit with no discounts. The company has found, however, that only 20% of a month's sales are collected in the month of sale. 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. Monthly operating expenses for the company are given below: Variable expenses: Sales commissions 4% of sales Fixed expenses: Advertising $200,000 Rent $18,000 Salaries $106,000 Utilities $ 7,000 Insurance $3,000 Depreciation $14,000 Insurance is paid on an annual basis, in November of each year. The company plans to purchase $16,000 in new equipment during May and $40,000 in new equipment during June; both purchases will be for cash. The company declares dividends of $15,000 each quarter, payable in the first month of the following quarter. Other relevant data is given below: Cash balance as of March 31st $74,000 Inventory balance as of March 31stย $112,000 Merchandise purchases for March $200,000 The company maintains a minimum cash balance of at least $50,000 at the end of each month. All borrowing is done at the beginning of a month; any repayments are made at the end of a month. The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. 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 will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash. Required: Prepare a cash budget for the three-month period ending June 30. Include the following detailed budgets: 1. a. A sales budget, by month and in total. b. A schedule of expected cash collections from sales, by month and in total. c. A merchandise purchases budget in units and in dollars. Show the budget by month and in total. d. A schedule of expected cash disbursements for merchandise purchases, by month and in total. 2. A cash budget. Show the budget by month and in total. Determine any borrowing that would be needed to maintain the minimum cash balance of $50,000. ย  ย  ย  PROJECT 1 – Excel Template Student Name: SALES BUDGET: April May June Quarter Budgeted unit sales Selling price per unit Total sales SCHEDULE OF EXPECTED CASH COLLECTIONS: April May June Quarter February Sales March Sales April Sales May Sales June Sales Total cash collections MERCHANDISE PURCHASES BUDGET: April May June Quarter Budgeted unit sales Add desired ending inventory Total needs Less beginning inventory Required purchases Cost of purchases @ $4 per unit BUDGETED CASH DISBURSEMENTS FOR MERCHANDISE PURCHASES: April May June Quarter March Purchases April Purchases May Purchases June Purchases Total cash payments EARRINGS UNLIMITED CASH BUDGET FOR THE 3 MONTHS ENDING JUNE 30 April May June Quarter Cash balance Add collections from customers Total cash available Less disbursements Merchandise purchases Advertising Rent Salaries Commissions Utilities Equipment purchases Dividends paid Total disbursements Excess (deficiency) of receipts over disbursements Financing: Borrowings Repayments Interest Total financing Cash balance, ending