Exquisite Bedding Limited You have recently been promoted as Management Accountant of Exquisite Bedding Limited, a small company that manufactures a specialized bed for the elderly which is sold to the public and its wholly-owned subsidiary company, Ultimate Care Ltd a retain department store. The company uses a rolling budgetary control system and is in the process of preparing the budget for the four months period from September to December 2021. During the preliminary review, you established that the company intends to sell each bed produced for $219 to Ultimate Care in addition to individual customers on the same credit terms. Exquisite Bedding Ltd secured a cash loan of 120,000 from Broughton Bank that was secured on the land and building at an interest rate of 7.5% per annum. The loan is due to be received in November 2021. The repayment of the loan will begin on March 1, 2022, however monthly interest payments will begin in December 2021. Also, machinery costing $112,000 will be received in November and paid for in December. You have been provided with the following budgeted balance sheet information as at September 1, 2021 as well as estimates and other operating data:

Other information: 1. Estimates sales in units for September will be 80 units. Sales units will increase by 10 units each month.

2. All sales are on account. The customer is allowed to pay 50% in the month of sale and the remainder the month following sale.

3. Sales on account for August was $18,080.

4. Stock valuation was done using FIFO method and closing stock of finished goods is 100 units. The companys policy is to have the next months sales in units in stock of finished goods at the end of each month

5. It is the companys policy to maintain 50% of the materials required for the next months production. The opening stock of raw material is 175 kgs

6. The company estimated that it will have to pay $10 per unit for raw materials. 5 kgs of raw material is required to produce one bed.

7. All purchases of raw material are on account. 60% of raw material purchases are paid for in the month of purchase and 40% the month following purchase. Accounts payable for August 31, 2021 was 3900.

8. Fixed overheads were estimated at $1,200 per month.

9. The company sublets a section of the factory and the monthly rent of $3,000 is received in the month incurred.

10. Each bed takes 12 labour hours at a rate of $5 per labour hour.

11. An interim dividend of $20,000 for 30th September 2021 will be paid in November 2021.

12. The company will purchase a special tool for $70,000 in November to increase the production of specially designed headboards.

13. Depreciation for the four months, including the new machinery, was calculated to be: Machinery and equipment $15,733 Motor Vehicle $3,500

14. Other monthly expenses are as follows: transportation cost $1,250 and miscellaneous expenses of $750

15. The companys policy is to maintain a minimum cash balance of $10,000 each month.

You are required to prepare the following budgets for the four months and in total:

Sales budget [6 marks] Cash collection schedule [10 marks]

Production budget [12.5 marks]

Direct material budget [14.5 marks]

Cash disbursement budget [10 marks]

Labour budget [4.5 marks]

Overhead budget [4.5 marks]

Cash budget [31.5 marks]

Exquisite Bedding Limited Budgeted Balance Sheet as at September 1, 2021 ASSETS Cost Depreciation to Date Non-current Asset $ $ Land and Building 500,000 0 Machinery and equipment 124000 84500 Motor Vehicles 42000 16400 666,000 100,900 Current assets Closing stock: Raw materials 4320 Finished goods 10450 14770 Receivables 9040 cash at bank 6790 Total Asset Net book value $ 500,000 39,500 25,600 565,100 30600 595,700 Equity 500,000 $1 ordinary shares Share premium Retained earnings 500000 50960 40840 591800 Current liabilities Accounts payable Total Equity and liability 3900 595700