Byron Ltd estimated sales for the forthcoming months are:

November 25,000 @ $3.70

December 40,000 @ $3.90

January 20,000 @ $3.80

February 15,000 @ $3.60

March 10,000 @ $3.50

April 5,000 @ $3.50

Past experience has shown that collections from sales average:

25% cash received in the month of the sale

55% in the month following the sale,

and 20% two months following the sale.

Opening inventories (units) each month are required to be equal to 75% of the months expected sales. Production capacity is a maximum of 50,000 units per month. Each finished unit requires 3.6 kilograms of raw material at a cost of 48 per kilogram. The firm maintains an inventory of 20,000 kilograms of raw material, as replacement stocks are not readily available. Purchases are made on 60 days credit terms.

The costs are:

Labour variable $1.05 per unit

fixed $4,000 per month

Overheads variable 5% of sales

fixed $4,700 ($2,200 non-cash)

The cash balance at 31 December was $12,000 (credit) and the company has an overdraft limit of $50,000.

Prepare the following budgets for January, February and March:

(a) sales

(b) purchases

(c) production, and

(d) cash.