COURSE PROJECT A INSTRUCTIONS You have just been hired as a new management

COURSE PROJECT A INSTRUCTIONSYou have just been hired as a new management trainee by Earrings Unlimited, adistributor of earrings to various retail outlets located in shopping malls across thecountry. In the past, the company has done very little in the way of budgeting and hasexperienced a shortage of cash at certain times of the year.Because you are well trained in budgeting, you have decided to prepare comprehensivebudgets for the upcoming second quarter to show management the benefits that can begained from an integrated budgeting program. To this end, you have worked withaccounting and other areas to gather the information assembled below.The company sells many styles of earrings, but all are sold for the same price—$10 perpair. Actual sales of earrings for the last 3 months and budgeted sales for the next 6months follow (in pairs of earrings).The concentration of sales before and during May is due to Mother’s Day. Sufficientinventory should be on hand at the end of each month to supply 40% of the earringssold in the following month.Suppliers are paid $4 for a pair of earrings. One half of a month’s purchases is paid forin the month of purchase; the other half is paid for in the following month. All sales areon credit, with no discount, and payable within 15 days. The company has found,however, that only 20% of a month’s sales are collected in the month of sale. Anadditional 70% is collected in the following month, and the remaining 10% is collected inthe second month following sale. Bad debts have been negligible.Monthly operating expenses for the company are given below.Insurance is paid on an annual basis, in November of each year.The company plans to purchase $16,000 in new equipment during May and $40,000 innew equipment during June; both purchases will be for cash. The company declaresdividends of $15,000 each quarter, payable in the first month of the following quarter.A listing of the company’s ledger accounts as of March 31 is given below.The company maintains a minimum cash balance of $50,000. All borrowing is done atthe beginning of a month; any repayments are made at the end of a month.The company has an agreement with a bank that allows the company to borrow inincrements of $1,000 at the beginning of each month. The interest rate on these loans is1% per month, and for simplicity, we will assume that interest is not compounded. At theend of the quarter, the company would pay the bank all of the accumulated interest onthe loan and as much of the loan as possible (in increments of $1,000), while stillretaining at least $50,000 in cash.Required:Prepare a master budget for the 3-month period ending June 30. Include the followingdetailed budgets.1.a. A sales budget, by month and in totalb. A schedule of expected cash collections from sales, by month and inoototaloc. A merchandise purchases budget in units and in dollars. Show thebudget by month and in total.od. A schedule of expected cash disbursements for merchandisepurchases, by month and in total2. A cash budget. Show the budget by month and in total. Determine anyborrowing that would be needed to maintain the minimum cash balance of $50,000.3. A budgeted income statement for the 3-month period ending June 30. Use thecontribution approach4. A budgeted balance sheet as of June 30