Victoria Kite Company

Victoria Kite Company sells kits on the web wants a master budget for

The next three months beginning January 1, 2005.

1) It desires an ending minimum cash balance of $5,000 each month.

2) Sales forecasted at an average wholesale selling price of $8 per kite.

In January, Victoria Kite is beginning just-in-time (JIT) deliveries from suppliers, which means that purchases equal expected sales

3) On January 1, purchases will cease until inventory reaches $6,000, after which time purchases will equal sales. Merchandise costs average $4 per kite.

4) Purchases during any given month are paid in full during the following month.

5) All sales are on credit, payable within 30 days, but experience has show that:

60% of current sales are collected in the current month,

30% in the next month, and

10% in the month thereafter. Bad debts are negligible.

6) Monthly operating expenses are as follows:

Wages and salaries $15,000

Insurance expired 125

Depreciation 250

Miscellaneous 2,500

Rent 250/month + 10% of quarterly sales over 10,000

7) Cash dividends of $1,500 are to be paid quarterly, beginning January 15, and are declared on the fifteenth of the previous month.

8) All operating expenses are paid as incurred, except insurance, depreciation, and rent.

9) Rent of $250 is paid at the beginning of each month, and the additional 10% of sales is paid quarterly on the tenth of the month following the end of the quarter.

The next settlement is due January 10.

10) The company plans to buy some new fixtures for $3,000 cash in March.

11) Money can be borrowed and repaid in multiples of $500 at an interest rate of 10% per annum.

Management wants to minimize borrowing and repay rapidly. Interest is computed and paid when the principal is repaid.

11A) Assume that borrowing occurs at the beginning, and repayments at the end of the month s in questions.

11B) Money is never borrowed at the beginning and repaid