Master Budgeting with Supporting Schedule Essay Example for Free

Master Budgeting with Supporting Schedule EssayCravat Sales Company, a nationwide distributor of a authors silk ties with an exclusive franchise on the distribution of the ties, and sales have grown rapidly over the last few years. Your have been given over indebtedness for all planning and budgeting.Your assignment is to prep ar a master budget for the next 3 months, starting April 1st. You are anxious to make a kind impression on the president and have assembled the information below.The company desires a minimum expiry specie balance each month of ,000. The ties are interchange to retailers for $8 each. Recent and entered sales in units are as followsThe large buildup in sales before and during June is due to Fathers Day. Ending inventories are supposed to equal 90% of the next months sales in units. The ties cost the company $5 each.Purchases are paying(a) for as follows50% in the month of purchase, and the stay 50% in the adjacent monthAll sales are on credit, wi th no discount, and payable within 15 days, however, only 25% of a months sales are collected by month-end. An additional 50% is collected in the following month, and the remaining 25% is collected in the second month following sale. Bad debts have been negligible.The companys monthly selling and administrative expenses are given belowVariable monthly expensesSales commissions (per unit)$1.00Fixed monthly expensesWages and salaries$22,000.00Utilities$14,000.00Insurance$1,200.00Depreciation$1,500.00Miscellaneous$3,000.00All selling and administrative expenses are paid during the month, in cash, with the exception of depreciation and insurance expired. Land will be purchased during May for $25,000 cash.The company declares dividends of $12,000 each quarter, payable in the outset month of the following quarter.The companys balance sheet at March 31 is given belowThe 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 $40,000. The come to 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 increments of $1,000), while still retaining at least $10,000 in cash.AssignmentsPrepare a master budget for the three-month period ending June 30, including* sales budget by month and in total* schedule of expected cash collections from sales, by month and in total* merchandise purchases budget in units and in dollars, by month and in total* schedule of expected cash disbursements for merchandise purchases, by month and in total* cash budget by month and in total* budgeted income statement for the three-month period ending June 30, with the contribution approach* budgeted balance sheet as of June 30SolutionsBased on the sale forecast from April to July and the expected cash collection porti ons in each month (25% 50% 25%) , a sales budget ,a schedule of expected cash collections from sales, a merchandise purchases budget and schedule of expected cash disbursements were calculated and displayed in Table 1.Table 1 Cravat Sales CompanyExpected sales, cash collections, and cash disbursements for merchandise purchasesUnit USDThe Cravat Sales Company was expected to spend $195,750, $256,250, and $251,250 in cash for purchasing of merchandises in April, May, and June respectively. Totally, it would spend $703,250 within the 2nd quarter.In the first attempt to forecast the cash funding, we found that the company could not borrow less than $40,000 per month as agreed with the bank while maintaining the minimum ending cash balance of $10,000 at the same time. If comply only the borrowing limit, it would keep marginal cash of $2,250 in hands by end of April and ache severe cash shortage of $37,000 by the end of May.