Lewisham Ltd manufactures one product line — the Zenith. Sales of Zeniths over the next few months are planned as follows:

requires 0.5 kg of the raw material, which costs £1.50 per kg.

Raw materials are paid for in the month after purchase.

5 Labour and overheads The direct labour cost of each Zenith is £0.50. The variable overhead element of each Zenith is £0.30. Fixed overheads, including depreciation of £25,000, total

£47,000 per month.

AU labour and overheads are paid during the month in which they arose, i 6 Cash in hand The company plans to have a bank balance (in funds) at 1 August of £20,000.

You are required to prepare the following budgets:

(a) Finished stock budget (expressed in units of Zenith) for each of the three months fuly, August and September.

(b) Raw materials budget (expressed in kg of the raw material) for the two months fuly and August

(c) Cash budget for August and September.

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1 Demand units July 180,000 August 240,000 September 200,000 October 180,000 Each Zenith sells for 3 each. 2 Debtor receipts Debtors are expected to pay as follows: 70% during the month of sale 28% during the following month The remainder of debtors are expected to go bad. Debtors who pay in the month of sale are entitled to deduct a 2 per cent discount from the invoice price. 3 Finished goods stocks Stocks of finished goods are expected to be 40,000 units at 1 July. The company's policy is that, in future, the stock at the end of each month should equal 20 per cent of the following month's planned sales requirements. 4 Raw materials stock Stock of raw materials is expected to be 40,000 kg on 1 July. The company's policy is that, in future, the stock at the end of each month should equal 50 per cent of the following month's planned production requirements. Each Zenith