Pierce Pommery specializes in the manufacture of dry cider. The 1-litre bottles sell for £3.00 each, with 25% of sales on cash terms and 75% on one month’s credit. The budget shows the following sales volumes:
Month_______________________________________ Litres
August............................................................. 400,000
September...................................................... 340,000
October........................................................... 300,000
November....................................................... 260,000
December....................................................... 320,000
January............................................................ 250,000
The company’s policy is for opening stock of cider to equal one-fifth of each month’s sales, but the stock of cider on 1 September was actually 80,000 litres. For stocks of apples, the policy is for opening stock to equal 50% of each month’s usage. On 1 September, the stock of apples was actually 2,200 tonnes. On average, 15 kilograms of apples are needed to produce 1 litre of cider (1 tonne = 1,000 kg). The cost price of apples is £50/tonne in September and October but £150/tonne in November and December as they have to be imported. Direct labour is paid in the month it is incurred and costs £0.20 a litre. Fixed overheads are £30,000 a month (including £5,000 for depreciation). Payment for apples is made two months after purchase but all other expenses are paid for one month after being incurred.

Tasks:
1.  For the months of September, October, November and for the quarter as a whole, prepare the production budget (in litres) and the purchases budget (in tonnes and £).
2.  For November only, prepare the cash budget. (Assume the bank balance on 1 November is £495,900 overdrawn.)