1. Barn yard manufactures and sells dish liquid to drug stores. The following estimates are for 2021. Selling price is $16 per bottle.

Expected demand (units)

January 20,000

February 22,000

March 23,000

April 24,000

May 25,000

June 26,000

July 27,000

Inventory on January 1 is 4,000 bottles. Planned ending inventory for each month is 35 percent of the sales for next month.

Materials and Labour requirement for 800-ml bottle:

Liquid 300 ml

Fragrance 200 ml

Water 300 ml

Inventory of Liquid and Fragrance on January 1 is 2,500,000 ml of Liquid and 3,000,000 grams of fragrance. Planned ending inventory each month for each ingredient is 30 percent of production needs for the subsequent month.

Direct manufacturing labour is 30 seconds per bottle. Wage rate is $20 per hour.

Collection of sales is 30% in the month of sale 20% in the subsequent month and 50% two months after sale. Retailers who pay in the month of sale receive a 8% discount. Budgeted sales for November and December were 12,000 and 13,000 units respectively.

Payment of purchases are 40% in the month of sale 50% in the subsequent month and 10% two months after purchase. A 10 percent discount is provided by suppliers for purchases paid in the month of purchase. Budgeted purchases for November and December 2020 are 2,500,000 and 2,220,000 ml for Liquid, 2,650,000 and 3,200,000 ml for fragrance. Liquid costs 2.5 cents per ml, and fragrance costs 2 cents per ml. Per unit cost for beginning inventory of dish liquid is equal to January per unit cost.

Other information:

$3,500 per month for overhead (allocated to units based on production)

Employee benefits of 25% of gross wages.

$65,000 administrative expense per month.

Barn Yard will pay dividends of $60,000 each month from January to April.

Repairs of $175,000 in April

Equipment purchases of $30,000 in April.

Interest rate is 4% per year.

1. Revenue budget for January to May
2. Budgeted production for January to May
3. Budgeted purchases for January to May for liquid and fragrance
4. Budgeted cash collections for January to May
5. Budgeted cash payments for January to May
6. Balance in accounts payable and accounts receivable at the end of May.
7. Cost of ending inventory for liquid, fragrance and dish liquid for January to May. The unit cost for dish liquid should equal liquid, fragrance, labour and overhead cost. Overhead each month is allocated based on monthly production (overhead cost /monthly production). The unit cost for January 1 inventory is the same as unit cost for January.
8. Cost of goods sold for January to May
9. Gross profit margin for January to May
10. Prepare cash budget for January to May. On January 1 cash balance of $40,000. Minimum cash balance should be $40,000.