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 2017 and the first 7 months of the next financial year is as follows:

		Number of units
January February March April May June July August September October		12000 12000 12500 13000 14000 14000 15500 16000 18000 24000

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 2017 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 2017 is $82000.

5. Variable selling expenses are 5% of sales. Administrative expenses are $52500 per quarter, of which $8200 represents depreciation expense and $40000 is wages. Fixed selling expenses are $15200 each quarter. All selling and administrative expenses are paid in the quarter in which they are incurred.

6. The production requirements are:

	Direct materials	Direct labour
Per unit	1 kg	0.4 hour

The direct materials are purchased for $4 a kilogram. The direct labour wage rate is $16 an hour. The factory overhead cost is $64000 per month, and is paid in the month incurred (except for depreciation of $12000).

7. The 1 April 2017 cash balance is expected to be $16800.

Required

A. Prepare a sales budget by month for the period February to June 2017.

B. Determine estimated cash collections from receivables for the first quarter of the financial year commencing 1 April 2017.

C. Calculate the number of units to be produced in the first quarter of the financial year commencing 1 April 2017.

D. Prepare a direct materials budget for the first quarter of the financial year commencing 1 April 2017.

E.  Prepare a cash budget for the first quarter of the financial year commencing 1 April 2017 including any necessary schedules.

F.  Prepare a budgeted income statement for the first quarter of the financial year commencing 1 April 2017.

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.