ABC Pty Ltd produces turbines used in the production of hydro-electric generating equipment. The turbines are sold to various engineering companies that produce hydro- powered generators in Australia.

Details of the operations for the coming four months are provided in the attached excel spread sheet.

Other information:

• The company plans to purchase land for future expansion
• Sales are on credit. Amounts not received in the month following the sale are
• written off as bad debt immediately.
• The payment for labour and purchases of materials and other costs are for cash
• and paid for in the month of acquisition.
• If the firm develops a cash shortage by the end of the month, sufficient cash is
• borrowed to cover the shortage (including any interest payments due ). Any cash borrowed is repaid one month later, as is the interest due.
• During the process of preparing the organisation's budget, the Sales Manager is discussing the possible outcome of the forthcoming election with the Production Manager. She noted that if one of the major political parties wins the election and forms the government, there is a strong possibility that alternative sources of energy such as hydro-powered electricity may no longer be as actively supported by the new government as is the case under the current government.
• The sales manager's primary concern is that market for alternative power generation is already volatile and subject to significant uncertainty. The production manager is also concerned about his plans to build the new automated manufacturing facility on the land to be purchased in May. This new manufacturing facility will enable him to manufacture, in-house, the major two parts he is now purchasing and to significantly automate the assembly process that is currently somewhat labour intensive. His projection for the new facility indicates a reduction in direct material & direct labour costs of 33% but that his fixed manufacturing overheads are likely to increase by 65% due to the increased investment in production capacity.
• Required:
• Part A: Prepare Operating Budgets as follows: (75% of the marks)

1. Ending Inventory Budget for the month of June
2. Cost of goods Sold Budget for the quarter
3. Budgeted Income Statement for the quarter
4. Monthly Cash budget for the quarter

Budgeted Manufacturing Overheads Recent statistical data for Maintenance Costs Labour Hours 1,302,000 1,485,000 1,353,500 1,242,000 Total Maintenance Costs 579,920,000 585,80 5,000 $32,215,000 $77,625,000 Fixed Cost Variable Cost component per component per month DL hour Indirect labour $0 $56.70 Power 50 $5.40 Maintenance ?? ?? Supervision $37,800,000 50 Depreciation $3,375,000 50 Rates & Utilities 52,339,100 SCI Other 513,500,000 540.50 April May June Variable Selling Expenses $82,175,000 $50,220,000 $58,497,500 Fixed Selling 8: Admin Expenses $24,300,000 $19,440,000 521,570,000 Total Selling a Admin Expenses $87,075,000 $69,660,000 $78,867,500 Cash on hand at opening 53,315,000 Annual interest rate on borrowing 5% Cash Sales 50 Received in month of sale 80% Received in month after sale 1895 Balance of accounts receivables at the start of the month $82,853,000 Dividends paid in June 51,194,150 Land purchased in l'iiliavr $185,100,000 ABC Pty Ltd Sales April May June July Actual Sales Volume 3-moths to June Units 67,500 54,000 60,750 81,000 162,200 Unit selling price $6,200 The desired finished goods inventory for each month is 60% of the next month's sales The full absorption cost of the opening finished goods inventory is $4,730 per unit The variable manufacturing cost of the opening finished goods inventory is $1,930 per unit Finished goods inventory on April 1 is 43,200 units Materials required to be on hand at the beginning of the month to produce 20% of that month's estimated sales Direct Material used per unit Actual Material Used - 3 months to June Rotor Blades Rotor Blades Quantity 5 750,800 729,100 Cost per unit $81 $108 Actual cost of material Used - 3 months to June $48,651,840 $80,883,680 Budgeted Direct Labour time per unit 8 hours Actual Labour Used - 3 months to June 1,662,590 Direct Labour cost per hour $50 Actual cost of labour Used - 3 months to June $70,660,100