HAC BUSINESS PLAN FOR NEXT YEAR Production Units Sales Units 600 Nov (This year) 500 Dec (This year) 550 650 Jan 400 350 Feb 450 500 Mar 300 350 350 400 Apr May 400 400 Jun 500 550 Jul 500 500 600 600 Aug Sep 700 650 Oct 750 750 Nov 800 850 Dec 850 850 -At the end of this year, HAC will have an overdraft of (a) $8,000 for the short-term plan within one year and the bank will ask for eliminating that borrowing by the end of next year. -Throughout next year, the business plans to spend more for the marketing budget (advertising expense) which in turn generates these increases in sales. Payments for advertising of (b) $500 will be made at the end of every quarter. -The selling expenses will be costed about 10% of each month's sales revenue and are payable in the following month. -The selling price per unit will be (c) $30 throughout the year. 40% of sales are normally made on two months' credit. The other 40% are settled within the month of sale. Additionally, the rest 20%, customers pay with a credit card. The charge made by the credit card business is (d) 2.0% of the sales revenue value and will be added to the selling expenses for the month of sale. The credit card business pays back the money to HAC in the month concerned. -Raw materials will be held for one month before they are taken into production. Suppliers allow one month's credit. The cost of raw materials is (e) $5 per unit of production. -The direct labour cost will be (f) $12 per unit of production. This is a variable cost and be paid in the month concerned. - Various fixed production overheads run at (g) $1,200 a month from October this year and increase by (h) $50 every three months. Overheads are planned to be paid 70% in the month of production and 30% in the following month. You have to review its plan and accomplish the following tasks: 1. prepare Sales budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Cash sales Credit Card Sales Received on account from: Nov (last year) Dec (last year) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total cash receipts 2. Cash Budget Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Total cash receipts Payments for: Trade payables Labour cost Overhead cost Selling expense Marketing expense Credit card charge Total disbursements Financing: Borrowings repayment Ending cash balance 3. Budgeted Income Statement Sales Less: COGS Gross Margin Less: Selling and Administration expenses Net income before taxes Income Tax Expense (40%) Net income