Baby ABC Company manufactures baby clothes for various hypermarket chains. However, due to high competition, the demand for baby clothes has dropped for the next two months. You have been asked to advise the management of Baby ABC Company on the effect of this situation on cash flow. The following data has been made available: Month Budgeted sales (units) Budgeted production

(units) January 9,000 9,000 February 8,000 9,000 The selling price of the baby clothes is RM 25.00 per unit and the variable production cost per unit is RM 10.00 which comprises of: Direct materials RM 5.00 Direct labour RM 3.00 Production overheads RM 2.00

Additional information: a) The current balance of cash is RM 15,000 b) The customers will pay the company 50% in cash and the customers are given two month credit. 30% credit is given for the first month and the remaining sales balances will be paid during second month. c) The company policy is to pay creditors for materials one month after purchases are made. The current amount outstanding to materials supplier is RM 5,000 which will be paid during January. d) Wages of RM 20,000 are paid at the end of each month. During the month of January and February, the company also paid 30% bonus to top management on the wages earned by the employees e) The current balances owing from debtors is RM 4,000 of which RM 3,000 will received during January and the remainder during February.

BAC502 MANAGEMENT ACCOUNTING 2 FEB-JUNE 2020 Final Assessment CONFIDENTIAL

Page 5 of 10 2020 Turn Over f) Fixed production overhead cost is RM 10,000 per month includes RM 1,500 for depreciation of machinery and equipment

Required: Prepare a cash budget for the months of January and February 2016. Showing the cash balances at the end of each month