Ruthven Manufacturing Ltd is preparing a master budget for the first quarter of the financial year ending 31 March 2021, and has compiled the following data.

1. The firm sells a single product at a price of $24 per unit. The sales forecast (in units) prepared by the marketing department for the quarter ending 31 March 2020 and the first 7 months of the next financial year is as follows.

2. 40% of the sales are collected in the month of sale, 40% are collected in the following month, and 20% are collected in the second month following the sale.
3. The beginning inventories on 1 April 2020 will be 4200 units of finished goods and no raw materials. The ending finished goods inventory should equal 20% of the sales requirements for the next 3 months, and the raw materials ending inventory should equal 40% of the next month’s production.
4. 80% of the material purchases are paid in the quarter of purchase and 20% are paid in the following quarter. The amount owing for purchases at 1 April 2020 is $82 000.
5. Variable selling expenses are 5% of sales. Administrative expenses are $52 500 per quarter, of which $8200 represents depreciation expense and $40 000 is wages. Fixed selling expenses are $15 200 each quarter. All selling and administrative expenses are paid in the quarter in which they are incurred.
6. The production requirements are below.

The direct materials are purchased for $4 a kilogram. The direct labour wage rate is $16 an hour. The factory overhead cost is $64 000 per month, and is paid in the month incurred (except for depreciation of $12 000).
7. The 1 April 2020 cash balance is expected to be $16 800.

Required

(a) Prepare a sales budget by month for the period February to June 2020.

(b) Determine estimated cash collections from receivables for the first quarter of the financial year ending 31 March 2021.

(c) Calculate the number of units to be produced in the first quarter of the financial year ending 31 March 2021.

(d) Prepare a direct materials budget for the first quarter of the financial year ending 31 March 2021.

(e) Prepare a cash budget for the first quarter of the financial year ending 31 March 2021 including any necessary schedules.

(f) Prepare a budgeted income statement for the first quarter of the financial year ending 31 March 2021.
(g) Calculate the difference between the expected increase in cash and the profit or loss for the first quarter. Explain why the two amounts are different.

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January February March April May June July August September October Number of units 12000 12000 12 500 13000 14000 14 000 15500 16000 18000 24 000