Health & Wellness Consultants

Health & Wellness Consultants produces and sells Sculp Max, a weight loss product for men and women. The company has been profitable for over five $(5)$ years. Its main customers are fitness enthusiasts and persons with non$-$communicable diseases such as diabetes and hypertension. The company has a long$-$term plan that it breaks down into annual budgets.

The company's projected cash balance is $$750,000$ on January $1,2025.$ If the entity needs to borrow money, it should be repaid in four equal instalments on the last day of each quarter. The interest rate will be $15\%,$ and interest payments will also be quarterly $($calculated using simple interest$).$

Each finished product requires $\frac{1}{41}b$ material. Other raw materials are insignificant in cost and are treated as indirect materials. The following projections for $2025$ are made available:

Sales for December $2024$ are projected to be $45,000$ units. The marketing and sales manager anticipates that sales will increase by $500$ units each month, commencing in January $2025,$ and this trend is expected to continue for the next two $(2)$ years.

The company's sales policy indicates that $60\%$ of all sales are on credit, with the remainder in cash. The company's collection experience shows:

$50\%$ collected in the month of sales

$20\%$ collected in the month following sales

$28\%$ collected two months following the sales

The remaining $2\%$ is deemed uncolectable.

The product sells for $$550$ per unit, which is expected to remain constant until December $2025.$

Health and Wellness Consultants want to keep enough finished goods inventory on hand to meet $25\%$ of the next month's sales. On December $31,2024,$ closing inventory stood at $9,100$ units.

Regarding raw materials, the company has a policy to keep $30\%$ of all material inventory to meet the next month's production needs. The closing inventory of raw materials for December $31,2024,$ was $11,600lbs.$

All direct$-$material purchases are made on credit, and $60\%$ of each month's purchases are paid for during the month of purchase. The other $40\%$ will be paid next month.

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

Projected manufacturing costs in $2025$ are as follows:

$$ Direct material $0\mathrm{.}25lbs$ per unit @ $$300$ per pound

$$ Direct labour $0\mathrm{.}20$ hrs per unit @ $$425$ per hour

$$ Production overhead is $$75$ per direct labour hour

$$ Total production cost per unit $$175$

Budgeting Project Summer $2024$

Page $2$ of $4$The following information relates to manufacturing overheads:

$$ Manufacturing overhead is expected to be $$1,000,000$ per month up to June $2025$

$$ Commencing July $2025,$ manufacturing overheads are expected to increase by $10\%$ for the rest of the year.

Selling expenses are estimated using the high$-$low method based on monthly sales figures. You are provided with total selling expenses for the previous $5$ months as shown below:

$\backslash$table$[[$December$,40,000$ units,$$380,000$