Fauji Fertilizers Ltd. manufactures a fertilizer used to increase production on various crops.

Sales are seasonal due to the seasonality in of crops. The expected pattern of sales for the next year (2021) is as follows:

Quarter 1st 2nd 3rd 4th

Sales in kg 4065 10,000 18,000 8,000

Each kg sells for $10. All sales are on account, and Faujis experience with cash collections is that 60 percent of each quarters sales are collected during the same quarter as the sale. The remaining 38 percent of sales is collected in the quarter after the sale. Fauji experiences 2% bad debts, to be incorporated in the budgeting process.

Sales in the first quarter of 2022 are expected to be $70,000 (7,000 kgs).

Fauji desires to have 10 percent of the following quarters sales needs in finished-goods inventory at the end of each quarter. (On December 31, 2020, Fauji expects to have 200 kg in inventory.)

Each kilogram fertilizer requires two kg of raw material. Fauji desires to have 10 percent of the next quarters raw material in inventory at the end of each quarter. (On December 31, 2020, Fauji expects to have 800 kg of raw material in inventory.)

The raw material price is $2.00 per kg. The company buys its raw material on account and pays 70 percent of the resulting accounts payable during the quarter of the purchase. The remaining 30 percent is paid during the following quarter. (The raw-material purchases in the fourth quarter of 2020 are expected to be $28,000.)

Prepare the following budget schedules for 2018. Include a column for each quarter and for the year.

a) Sales budget (in units and dollars).

b) Cash receipts budget.

c) Production budget.

d) Direct material budget. (The desired ending inventory in the fourth quarter is 800 kgs.)

e) Cash disbursements budget for raw material purchases.