Assessment Task 3 - Operating & cash budgets for a manufacturer Assessment scenario Sparks Pty Ltd has requested your assista nce in preparing their budgets. The demand for the product they manufacture and sell is seasonal and peaks in the third quarter. They have provided you with the following information relating to their forecasts and expectations for 2018 and the first half of 2019: Spark's product retails at $8 per unit. Budgeted sales for the 2018 year and first half of 2019 are as follows: 2018 year 2019 year Q1 Q2 Q3 Q4 Q1 Q2 Budgeted Sales (units) 40,000 60,000 100,000 50,000 70,000 80,000 Seventy-five per cent of sales are collected in the same quarter the sales are made and the remaining 25% in the following quarter. On 1 January 2018 the company will have $65 000 worth of accounts receivable which will all be collected in the first quarter of the year. Sparks Pty Ltd would like their ending inventory of finished goods at the end of each quarter to be equal to 30% of the budgeted sales for the next period. At the end of 2011 an ending balance of 12 90 units was in stock. Each unit requires 5 kilos of raw materials. The ending balance of raw materials should equal 10% of the following quarter's production needs. At the end of 2011 an ending balance of 23 000 kilos of raw materials was in hand. The cost of raw materials is $0.80 per kilo. Sixty per cent of purchases made are paid for in the same quarter and the remaining 40 % are paid for in the following quarter. The accounts payable balance relating to raw materials on 1 January 2018 will be $81 500. This will all be paid in the first quarter. Assessment Questions Using the information provided, prepare the following budgets and schedules for 2018 and the first half of 2019 showing both the quarterly and total amounts: 1. Sales budget 2. Production budget 3. Purchases budget for direct materials 4. Cash collection schedule 5. Cash disbursement schedule