BLZ manufactures very strong bricks for walls and security installations. Each brick is sold for K20. In 2020 60,000 bricks have been produced of which 50,000 are expected to be sold by the year end. Budgeted and actual costs for the period are as follows:

Budget Actual

Direct production costs per brick K10 K10

Variable factory overhead per brick K4 K4

Fixed overheads K72,000 K78,000

Variable selling expenses, per brick K1 K1

Fixed selling expenses K10,000 K10,000

Fixed overheads are absorbed on the basis of normal production. There was no opening stock at the beginning of the year, as 2020 is BLZs first year of production.

BLZ decide to monitor its cash flow. They also wishes to draw up a budget for 2021, the second year of trading. They estimate that sales will increase to 100,000 bricks, and they assume that the closing stock at the end of 2021 will be 20,000 bricks and that there will be no closing stock of raw materials.

Sales and costs are expected to arise evenly over the year. Debtors for sales pay three months in arrears. Variable production overheads are paid three months in arrears. All other costs are paid as they occur.

Selling prices and unit costs are expected to remain as in 2020, with the exception of fixed production overhead which are expected to increases to K80,000 in total.

BLZ expect to have an overdraft K10,000 by the end of 2020.

Required:

1. Draw up a statement calculating BLZs net profit for 2020.
2. Calculate BLZs profit for 2020 if marginal costing is used.
3. A 2021 production budget for BLZ.
4. A 2021 cash budget for BLZ.