Ch. 7 Case (P. 344-346, 1-4) CMA, adapted) CASE [LO7-2, LO7-4, LO7-8, L07-9, LO7
ID: 2509319 • Letter: C
Question
Ch. 7 Case (P. 344-346, 1-4) CMA, adapted) CASE [LO7-2, LO7-4, LO7-8, L07-9, LO7-IO] You have just been hired as a new management trainee by Earrings Unlimited, a distributor of various retail outlets located in shopping malls across the country. In the past, the company has little in the way of budgeting and at certain times of the year has experienced a shortage of cash,on veny Since you are well trained in budgeting, you have decided to prepare comprehensive budgets fou upcoming second quarter in order to show management the benefits that can be gained om ano e budgeting program. To this end, you have worked with accounting and other areas to gather the int informa tion assembled belowExplanation / Answer
2.
Interest = ($170000 x 1% x 3) + ($10000 x 1% x 2) = $5100 + $200 = $5300
Per Chegg guidelines, 4 sub-parts answered.
1a. Earrings Unlimited Sales Budget April May June Quarter Budgeted sales units 65000 100000 50000 215000 Selling price per unit $ 10 10 10 10 Total sales $ 650000 1000000 500000 2150000 1b. Earrings Unlimited Schedule of Expected Cash Collections April May June Quarter February sales 26000 26000 March sales 280000 40000 320000 April sales 130000 455000 65000 650000 May sales 200000 700000 900000 June sales 100000 100000 Total cash collections $ 436000 695000 865000 1996000 1c. Earrings Unlimited Merchandise Purchases Budget April May June Quarter Budgeted unit sales 65000 100000 50000 215000 Add: Desired ending merchandise inventory 40000 20000 12000 12000 Total needs 105000 120000 62000 227000 Less: Beginning merchandise inventory 26000 40000 20000 26000 Required purchases 79000 80000 42000 201000 Unit cost $ 4.00 4.00 4.00 4.00 Required dollar purchases $ 316000 320000 168000 804000 1d. Earrings Unlimited Budgeted Cash Disbursements for Merchandise Purchases April May June Quarter Accounts payable 100000 100000 April purchases 158000 158000 316000 May purchases 160000 160000 320000 June purchases 84000 84000 Total cash payments $ 258000 318000 244000 820000