A Len Auck and Brian Land trade as partners in Auckland Manufacturing Company making components for minicomputers. To cope with increasing demand the partners intend to extend their manufacturing capacity but are concerned about the effect of the expansion on their cash resources during the build-up period from January to April 2012.

The following information is available.

(a) The statement of financial position of Auckland Manufacturing Company at 31 December 2011 is expected to be:

(b) Accounts payable at 31 December 2011 are made up of:

Accounts payable for materials supplied in November and December at $£ 13,000$ per month 26,000 Accounts payable for overheads 1,550

$\overline{27,550}$

(c) New plant costing $£ 25,000$ will be delivered and paid for in January 2012.

(d) Raw material inventory are to be increased to $£ 12,000$ by the end of January 2012, thereafter raw material inventory will be maintained at that level. Payment for raw materials is made two months after the month of delivery. Finished goods inventory will be maintained at $£ 18,500$ throughout the period. There is no work in progress.

(e) Sales for the four months are expected to be:

\begin{tabular}{lr}

& $£$ \\

January & 18,000 \\

February & 22,000 \\

March & 22,000 \\

April & 24,000

\end{tabular}

Sales for several months prior to 31 December had been running at the rate of $£ 18,000$ per month. It is anticipated that all sales will continue to be paid for two months following the month of delivery.

(f) The cost structure of the product is expected to be:

\begin{tabular}{ll}

& $\%$ \\

Raw materials & 50 \\

Direct wages & 20 \\

Overheads, including depreciation & $17^{1 / 2}$ \\

Profit & $\underline{12^{1 / 2}} \mathbf{1 0 0}$

\end{tabular}

(g) Indirect wages and salaries included in overheads amount to $£ 900$ for the month of January and $£ 1,000$ per month thereafter.
(h) Depreciation of plant and machinery (including the new plant) is to be provided at $£ 700$ per month and is included in the total overheads.
(i) Wages and salaries are to be paid in the month to which they relate; all other expenses are to be paid for in the month following the month to which they relate.
(j) The partners share profits equally and drawings are $£ 400$ per month each.
(k) During the period to April an overdraft facility is being requested.
\section*{Required:}

(a) A forecast income statement for the four months January to April 2012 and a statement of financial position as at 30 April 2012.

(b) A month by month cash forecast for the four months showing the maximum amount of finance required during the period.

(c) A calculation of the month in which the overdraft facility would be repaid on the assumption that the level of activity in April is maintained.
For the purposes of this question, taxation and bank interest may be ignored.