For a company making one product you are required to produce:

(a) the budgeted production requirement (in units) for each of the months of March, April and May;

(b) the budgeted purchase requirements of raw material (in units) for each of the months of March and April;

(c) the budgeted profit and loss statement for April;

(d) the cash forecast for April.

The following data are available as at 1 March:

1. Budgeted sales:

Units

March 180,000

April 240,000

May 250,000

June 230,000

The selling price is 2 per unit.

Sales are invoiced twice per month, in the middle of the month and on the last day of the month. Terms are 2% for 10 days and net 30 days. Sales are made evenly through the month and 50% of sales are paid within the discount period. The remaining amounts are paid within the 30 - day period except for bad debts which average 12% of gross sales. Estimated cash discounts and bad debts are treated as deductions from sales in the company's profit and loss statements.

BUDGETING

2. Stacks of finished goods were 36,000 units on 1 March. The company's rule is that stocks of finished goods at the end of each month should represent 20% of their budgeted sales for the following month. No work-in-progress is held.

3. Stocks of raw materials were 45,600 kilograms on 1 March. The company's rule is that, at the end of of each month, a minimum of 40% of the following month's production requirements of raw materials should be in stock. Payments for raw materials are to be made in the month following purchase, and materials can only be bought in lots of40,000 kilograms or multiples thereof.

4. The standard production cost of the product, based on a normal monthly production of230,000 units, is:

Cost per unit

Direct materials (12 kilogram per unit) 0.50

Direct wages 0.40

Variable overhead 0.20

Fixed overhead 0.10

Total 1.20

Fixed overhead includes 8,000 per month depreciation on production plant and machinery. Any volume variance is included in cost of sales.

5. Production salaries and wages are paid during the month in which they are incurred.

6. Selling expenses are estimated at 10% of gross sales. Administration expenses are 60,000per month of which 800 per month relates to depreciation of office equipment. Selling and administration expenses and all production overhead are paid in the month following that in which they are incurred.

The opening balance is expected to be 12,000 on 1 April.