Answer: Regular monitoring and adjustments to the budgets throughout the quarter are essential to align them with actual performance and optimize financial outcomes.
Explanation:
Creating a master budget involves several interconnected budgets that help plan and manage the financial activities of a company. Here's an overview of the budgets you would need to prepare for Dimsdale Sports for the months of January, February, and March:1. Sales Budget :The sales budget estimates the expected sales revenue for each month. It considers factors such as historical sales data, market trends, and sales targets. It is important to analyze past sales performance and take into account any anticipated changes in customer demand or pricing strategies.2. Merchandise Purchases Budget :The merchandise purchases budget outlines the expected purchases of inventory for each month. It is based on the sales budget and considers factors such as desired ending inventory levels, lead times, and stock turnover ratios. This budget helps ensure sufficient inventory levels to meet customer demand while minimizing carrying costs.3. Selling Expense Budget:The selling expense budget outlines the estimated expenses associated with selling activities, such as advertising, sales commissions, and promotional events. It should be aligned with the sales budget and takes into account any planned changes in marketing strategies or salesforce compensation.4. General and Administrative Expense Budget:The general and administrative expense budget includes non-selling expenses such as rent, utilities, salaries, and depreciation. It should consider fixed and variable costs, as well as any planned changes in administrative operations or investments in fixed assets.5. Capital Expenditures Budget:The capital expenditures budget outlines the planned investments in long-term assets, such as equipment, machinery, or infrastructure. It should consider the company's expansion plans, maintenance requirements, and technological upgrades.6. Cash Budget:The cash budget helps manage cash flow by estimating the cash inflows and outflows for each month. It considers factors such as sales collections, payments to suppliers, operating expenses, loan repayments, and planned investments. The goal is to ensure sufficient cash liquidity to meet obligations and identify any potential cash shortages.7. Budgeted Income Statement:The budgeted income statement summarizes the expected revenues, expenses, and net income for the entire quarter (January, February, and March). It provides a comprehensive view of the company's financial performance based on the budgets prepared for sales, expenses, and other relevant factors.8. Budgeted Balance Sheet:The budgeted balance sheet reflects the financial position of the company as of March 31. It includes estimates of assets, liabilities, and shareholders' equity based on the budgets prepared for sales, expenses, capital expenditures, and cash flows. This helps assess the company's financial health and evaluate its ability to meet obligations.When preparing these budgets, it is crucial to consider historical data, market conditions, industry benchmarks, and internal strategic goals. Regular monitoring and adjustments to the budgets throughout the quarter are essential to align them with actual performance and optimize financial outcomes.