July	Aug	Sept	Oct	Nov	Dec
sales units	9000	9750	11,000	12,000	12500	12,800
Sales revenue	270,000	292,500	330,000	360,000	375,000	384,000

Each product unit requires 3kg of material X, which costs 4 per kg. Stocks of finished goods are maintained at 60% of the following months sales requirement.

Stocks of raw materials, sufficient for 20% of the following months requirements in kgs are held at the end of each month.

The cash collection pattern from sales is expected to be:

Cash Customers :30% of sales revenue will be for immediate cash. Credit Customers: 70% of sales revenue will be from credit customers. These debtors will pay their bills 50% in the month after sale and the remainder in

the second month of after sale.

One months credit is received from suppliers. Expenses of the business will be settled as follows:

Expected Costs :

Wages 10,000 plus 5% of sales revenue per month, payable as incurred.

Variable overheads 4 per unit, payable as incurred.

Fixed overheads (including depreciation) 28,000 per month, payable as incurred.

Capital Costs:

Equipment will be purchased on 1 July costing 60,000 which will have a useful life of 5 years.

To finance this purchase a loan of 48,000 will be secured at 10% per annum. This loan and interest will be repaid over 4 years. Monthly capital and interest payments will commence in August.

(a) Prepare a production budget for the four months July to October 2019. (4 Marks)

(b) Prepare a raw materials purchases budget (in units and ) for the four months July to October 2019. (6 Marks)

(c) Prepare a cash budget for the four months July to October 2019.

(d) Prepare a budgeted trading and profit and loss account for the four months ending 31/10/2019 (if the budgeted cost of a unit of finished goods is 20).

(e) What recommendations would you make to Irwin Ltd based on the budgets you have prepared?