Green Grower Inc. (GGI) has created a new type of indoor vegetable hydroponic system. The systems have been very popular with the home grower movement since the company first introduced them 4 years ago in 2018. GGI manufactures and sells two models the HSX and the HSY. The attached exhibits (1-4) contain key information for the Master Budget to be prepared for the upcoming 2022 fiscal year. GGI benefits from the final year of a 5-year tax holiday.

Youre in charge of the Master Budget and all planning and control at GGI. It is early January 2022 and the coming years budget is to be prepared by your team along with other relevant planning decisions.

The Chief Financial Officer (CFO), who is your direct supervisor, has asked you for the 2022 master budget and the amount (if any) of required borrowing to maintain the minimum cash balance at December 31, 2022. Your report must also include the following:

1. Break-even point in dollars for the bundle of HSX and HSY as well as the Margin of Safety in dollars for the planned level of activity in 2022.

2. Due to recession fears, the CFO would like to know the dollar impact on Operating Income if Sales decrease 20% from the planned activity in 2022. Additionally, how much in bank borrowings would be required to maintain the minimum cash balance on December 31, 2022?

Required: Prepare a report which includes everything the CFO has requested.

Exhibit 1: Balance Sheet on January 1, 2122 and related notes Exhibit 3: Master Budget assumptions and additional information 1. A minimum cash balance of $100,000 is to be maintained at all times. A local bank has provided a credit facility for this purpose. The interest rate is 5% on any bank borrowings and is payable at the end of the month following any borrowing. The bank extends credit in $1,000 increments. 2. Sales in November 2021 were $100,000 and sales in December 2021 were $290,000. 3. Direct materials purchased in December 2021: $150,000. 4. Projected sales volume is uniform for 2022 except November 2022 and December 2022 sales are projected to be $1,400,000 and $1,000,000 respectively. 5. 20% of all Direct Material purchases will be made in December 2022;50% will be purchased in March 2022 and 30% in August 2022. 6. Due to a long-term collective bargaining agreement, direct labour costs are the same for 20212022. 7. All expenses except direct material purchases are paid in the month incurred. Exhibit 4: Machinery Replacement Option Management will be replacing the existing machinery on July 1, 2022. There will be no interruption in operations when the setup will be performed during the last 2 weeks of June 2022. Operating costs, other than depreciation will be the same for both the new and old machinery. Information regarding New and Old machinery is provided below: A new loan of $1,440,000 will be obtained on June 30,2022 to finance the equipment purchase. The loan will bear annual interest of 6% and is secured by the equipment. The first semi-annual instalment of $144,000 plus interest is due on December 31,2022. Exhibit 1: Balance Sheet on January 1, 2122 and related notes Exhibit 3: Master Budget assumptions and additional information 1. A minimum cash balance of $100,000 is to be maintained at all times. A local bank has provided a credit facility for this purpose. The interest rate is 5% on any bank borrowings and is payable at the end of the month following any borrowing. The bank extends credit in $1,000 increments. 2. Sales in November 2021 were $100,000 and sales in December 2021 were $290,000. 3. Direct materials purchased in December 2021: $150,000. 4. Projected sales volume is uniform for 2022 except November 2022 and December 2022 sales are projected to be $1,400,000 and $1,000,000 respectively. 5. 20% of all Direct Material purchases will be made in December 2022;50% will be purchased in March 2022 and 30% in August 2022. 6. Due to a long-term collective bargaining agreement, direct labour costs are the same for 20212022. 7. All expenses except direct material purchases are paid in the month incurred. Exhibit 4: Machinery Replacement Option Management will be replacing the existing machinery on July 1, 2022. There will be no interruption in operations when the setup will be performed during the last 2 weeks of June 2022. Operating costs, other than depreciation will be the same for both the new and old machinery. Information regarding New and Old machinery is provided below: A new loan of $1,440,000 will be obtained on June 30,2022 to finance the equipment purchase. The loan will bear annual interest of 6% and is secured by the equipment. The first semi-annual instalment of $144,000 plus interest is due on December 31,2022