4 (30 marks, 54 minutes) Normal 2016 4.1 Ncununi Limited is preparing budgets for three months ending 30 June 2016. Budgeted sales, production and direct labour of the company's only product for the next five months are: The selling price is N$ 14 per unit. All sales are on account. Additional information: i. The company collects 70% of these credit sales in the month of the sale; 25% are collected in the month following sale; and the remaining 5% are uncollectible. Debtors who pay within a month get a 2% cash discount. ii. The accounts receivable balance on March 31 was N$ 30 000. All of this balance was collectible. iii. Raw materials used in production cost N$ 5 per unit. They are paid for a month before being used in production. The business is given a 2% trade discount. iv. V. vi. vii. viii. ix. x. Fixed manufacturing overhead is N$ 50 500 per month which includes N$ 20 500 in depreciation, variable manufacturing overhead is N$ 8 per direct labour-hour. Cash dividends of N$ 51 000 are to be paid to shareholders in May. Equipment purchases of N$ 143 700 are scheduled for May and N$ 48 800 for June. This equipment will be installed and tested during the second quarter and will not become operational until July, when depreciation charges will commence. Fixed selling and administrative expenses are N$ 70 000 per month and include N$ 10 000 in depreciation. Variable selling and administrative expenses are N$ 0,75 per unit sold. Wages, N$ 10 per hour paid in the same month as production. A line of credit is available at the bank where Ncununi Limited holds an account that allows the company to borrow up to N$ 75 000. All repayments occur at the end of the month, it was agree that half of the amount borrowed is to be repaid a month after the borrowing and remaining half two months after. Any interest incurred is payable monthly. The interest rate is 16% per year. Royal Company desires a cash balance of at least N$ 30 000 at the end of each month. balance at the beginning of April was N$ 40 000. The cash xi. REQUIRED: 4.1 TOTAL MARKS FOR QUESTION 4.1. An equipment no longer in use will be sold in June 2016 for N$ 15 000, 75% of this amount is on credit. Marks Cash budget for the period ending 30 June 2016 21 21 4.2. Ncununi Limited forecast production for three months ending 30 November 2016 are as follows: Forecast Production (Units) September 48 000 October November 32 000 December 25.000 41000 Additional information: L 5 kg of material are required per unit of product. ii. Management desires to have materials on hand at the III. end of each month equal to 10% of the following month's production needs. The beginning materials inventory was 13 000 kg on 31 August 2016. iv. material costs N$ 0,85 per kg. The 42 | Page REQUIRED: MARKS 4.2. Direct materials budget for the period ending 31 November 2017 9 TOTAL MARKS FOR QUESTION 4.2. 9 TOTAL MARKS FOR QUESTION 4 30