Reference no: EM133011194

The Road-E Corporation buys portable music mixing equipment then resells it $900 per unit; management plans to raise that price by $100 in May. The company had actual sales in February of 1,100 units then budgeted the following sales after that:

March 1,000 units

April 1,300 units

May 1,400 units

June 1,600 units

• All sales to customers are made on account and recent experience shows that 25% of sales are collected in the month of the sale and 75% in the month after the sale. The company purchases its product for $700 per unit and all purchases are paid in full in the month the purchase is made. The company maintains ending inventory equal to 30% of the next month's unit sales and had 250 units in inventory on March 1st. The company's advertising is ?xed at $3,800 per month, has other administrative costs of $32,500 per month and salaries of $40,000 per month; all selling and administrative expenses are paid in full each month. The company plans to give its salaried employees a one-time bonus of $5,000 in April.
• The company plans a big expansion and to assist that effort intends to purchase a $320,000 building in May; to help fund the purchase the company will take out a $1 10,000 bank loan in April. The company's cash balance on February 28th is $35,000.

Reguired:

Problem a. Given the information above, prepare a sales budget, purchases budget, budgeted income statement, cash budget and a budgeted balance sheet (for cash, accounts receivable, inventory, equipment and liabilities) for March, April and May.

Problem b. Given your results, brie?y comment on lhe company's expansion plans and give two related and speci?c recommendations for the company.