Drones Ltd. produces and sells "Skyview". The following information is an extract from the sales forecast report : The forecasted sales for the months of Apr to May 2021 are as follows :- Apr : 55,000 units May : 58,000 units The management of Drones has proposed to set a target ending finished goods for each month at 30% of the following month's sales. Drones estimates that sales will increase by 3,000 units (from the number of units sold in May) for the month of June.

Required : (1) Compute the following (show workings using a production budget or other means) :

(i) Budgeted production (units) for the month of Apr 2021.

(ii) Target ending finished goods (units) for May 2021.

(2) Ignore your calculations in part (1) above. Assume that the production manager has provided you with the following production budget : Mar Apr May Production (units) 52,500 55,500 58,500 Drones Ltd. pays its employees $11 per direct labour hour. The company pays 75% of the direct labour costs in the month of production and 25% in the month following the production. Each unit of Skyview requires 3 direct labour hours to produce.

Compute the following (show workings using a direct labour budget or other means) :

(i) Budgeted Direct labour hours for the month of Apr 2021.

(ii) Budgeted Direct labour cost ($) for the month of May 2021.

(iii) Expected Total cash payments for the month of Apr 2021.

(iv) Expected Total cash payments for the month of May 2021.

(3) Explain with an appropriate illustration the term 'participative budgeting'.

(4) Drones sells its products to Thailand, Singapore, Japan and the Philippines via distributors in each country. The company also sources materials for its products from various countries. Drone expects that the prices of the materials it uses will increase due to a rise in demand for these materials. You have been tasked to prepare the master budget (ie. all the budgets) for the coming year 2021.

(i) What information, data, assumptions and predictions would you require to prepare the budgets and explain why you need them.

(ii) Drones discovered that some of the budgets have been padded in the past. What affect would this have on the company and what can the company do to overcome this problem?