Master Budgeting with Supporting Schedule Essay Example for Free

Master Budgeting with Supporting Schedule EssayCravat Sales Company, a comprehensive distributor of a designers silk ties with an exclusive franchise on the distribution of the ties, and gross revenue construct grown rapidly over the last few years. Your have been given responsibility for totally formulation and budgeting.Your assignment is to prep be a master budget for the next 3 months, starting April 1st. You are noisome to make a favorable impression on the president and have assembled the information below.The company desires a minimum closing curtain funds equilibrise each month of ,000. The ties are sold to retailers for $8 each. fresh and forecasted sales in units are as followsThe large buildup in sales before and during June is due to initiates Day. Ending inventories are supposed to equal 90% of the next months sales in units. The ties cost the company $5 each.Purchases are paid for as follows50% in the month of purchase, and the remaining 50% in the follo wing monthAll sales are on credit, with no discount, and payable at heart 15 days, however, only 25% of a months sales are put in 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 sell and administrative expenses are given belowVariable monthly expensesSales commissions (per unit)$1.00Fixed monthly expenses earnings 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 silver, with the censure 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 first 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 follow in increments of $1,000 at the arising of each month, up to a total loan balance of $40,000. 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 increments of $1,000), speckle 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* agenda 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 overture* budgeted balance sheet as of June 30SolutionsBased on the sale forecast from April to J uly and the expected cash collection portions 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 purchases building block 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 pass by end of April and suffer severe cash shortage of $37,000 by the end of May.