Great Price Inc.

Great Price Inc. produces and sells plantain peelers. The company has been in operations for

over ten $(10)$ years and have been profitable since then. Its main customers are hoteliers in the

tourism sector. The company has a long$-$term plan that it breaks down in quarterly budgets.

On January $1,2023$ the company had a cash balance of $$450,000.$ If the entity needs to borrow

any money, it should be repaid in four equal installments on the last day of each quarter. The

interest rate will be $15$ percent, and interest payments will be quarterly as well.

Each finished product requires $12$ foot of direct material. Other raw materials are insignificant in

cost and are treated as indirect materials. Assuming that now is December $2022,$ the following

information has been made available:

$1.$ Sales in December have been projected to be $45,000$ units. The marketing and sales manager

is anticipating that sales will increase by $500$ units each month. This trend is expected to

continue for the next two $(2)$ years.

$2.$ The company$$s sales policy indicates that $60$ percent of all sales are on credit, with the

remainder of the sales in cash. The company$$s collection experience shows that $80$ percent of

the credit sales are collected during the month in which the sale is made, $18$ percent is

collected in the following month and $2\%$ is deemed uncollectible.

$3.$ The product sells for $$550$ per unit. These prices are expected to remain constant for the

remainder of the year.

$4.$ Sales forecast has been credible over the years and therefore the production manager is

confident that there is no need to keep more than $12\%$ of all inventory types in stock.

$5.$ All direct$-$material purchases are made on credit, and $60$ percent of each month$$s purchases

are paid for during the month of purchase. The other $40$ percent is paid in the next month.

$6.$ Indirect materials are purchased with cash as needed. Work$-$in$-$process is insignificant.

$7.$ Projected manufacturing costs in $2023$ are as follows:

Direct material $1\mathrm{.}5$ ft$.$ @ $$220$ per foot $$330$

Direct labour $0\mathrm{.}2$ hour @ $$500$ per hour $$100$

Production overhead $$250$ per direct labour hour $ $50$

Total production cost per unit $$480$

$8.$ The following manufacturing overhead costs are budgeted for $2023.$

January February March April

Indirect material $2,219,520\mathrm{.}002,088,960\mathrm{.}001,284,800\mathrm{.}002,133,840\mathrm{.}00$

Indirect labour $1,827,840\mathrm{.}001,508,400\mathrm{.}001,309,200\mathrm{.}002,023,680\mathrm{.}00$

Other overhead $1,538,160\mathrm{.}001,397,280\mathrm{.}001,032,000\mathrm{.}001,632,000\mathrm{.}00$

Depreciation $979,200\mathrm{.}00979,200\mathrm{.}00979,200\mathrm{.}00979,200\mathrm{.}00$

Total overhead costs $6,564,720\mathrm{.}005,973,840\mathrm{.}004,605,200\mathrm{.}006,768,720\mathrm{.}00$

$9.$ Selling and administrative expenses are based on a fixed cost of $$80,000$ per month plus $$3$

per unit sold. The fixed portion of selling and administrative expenses will include $$71,500$

per month for depreciation.

$3$

$10.$ The company expects that dividend of $$640,000$ will be declared and paid in cash at the end

of each quarter.

$11.$ The minimum ending cash balance per month is expected to be $$750,000.$

Required:

Prepare the master budget for Great Price Inc. in the first quarter of $2023($January $$ March$)$ and

in total by completing the following schedules and statements:

$($a$)$ Sales budget $($prepare December $2022$ as well$).(5$ marks$)$

$($b$)$ Schedule of cash collected from customers. $(12$ marks$)$

$($c$)$ Production budget $($prepare December $2022$ as well$).(12$ marks$)$

$($d$)$ Direct$-$material budget $($prepare December $2022$ as well$).$ Hint: partially complete April

$2023.(14$ marks$)$

$($e$)$ Schedule of cash disbursement to suppliers for direct material. $(8$ marks$)$

$($f$)$ Direct labour budget. $(6$ marks$)$

$($g$)$ Selling and administrative budget. $(11$ marks$)$

$($h$)$ Cash budget