Klean Steppers A group of students at the University of Technology, Jamaica recently won an award in the annual UTech, Ja Business Model Competition for their invention, a white dirt-proof sneaker for children in kindergarten. This invention arose from complaints from parents about having to buy white sneakers for their child children for physical education that soils easily. As a result of the invention, the students decided to start a business, Klean Steppers' to start production The sneakers have an innovative design and are made of a robus leather and cushioning material, which heightens the resistance to dirt and dust The following information was discussed at a meting with the Klean Steppets team. Sales and collections The sneakers are designed for girls and boys. Details of selling prices and projected sales in pairs of sneakers for the four-month period are shown below. Type Selling price Months July August September October Girls Boys S2900 195 230 S2500 250 290 320 280 190 160 It is expected that all sales will be on credit to department stores in Jamaica. It is estimated that 30% of customers will pay within one month while the remaining customers will pay the month following sale Production Production of sneakers will be based on sales demand. The company requires a closing inventory of 20% of the next month's budgeted sales in pairs of sneakers for girls and boys. There is no opening stock of inventory Direct Materials and Direct labour (a) The sneakers are made with special leather and specially trcatod rubber for the sole. The materials and labour required to make each pair of seakers are as follows Type of sneakers Leather Cushion Labour $370 per meter $230 per meter $340 per hour Girls 0.6m 0.15 15 minutes Boys 0.4m 0.10m 12 minutes The company requires a closing inventory of 10% of raw material required for the following month's material needed. There was no opening stock of raw material. The company plans to have a closing inventory of leather of 6.2m and 13m of cushioning material as at the 30 September 2 Materials are purchased from a company based in the Cayman Island. This supplier requires that 50% of the purchase total is paid for in cash with the order and allows one month's credit for the remaining amount (b) In keeping with government requirements, biodegradable cardboard boxes will be used to package the sneakers. Each box will cost $28.50 per bor. The company will buy the packaging materials from a Jamaican company for cash cach month. (c) To make girls' sneakers, each unit requires 15 minutes of direct labour hours and to make boys' sneakers each unit requires 12 minutes of direct labour hours. The company pays $340 per hour for each direct tabour hour. Labour costs are paid in the month incurred. Manufacturing Overheads (d) The following manufacturing overheads are budgeted for the quarter Indirect material Indirect labour Other overhead Depreciation July S10.200 $4,800 53.100 August SI1.200 S4,120 $2,400 S1,800 September $12.200 $4,280 $2,700 S1,800 S1,800 In addition to the above overheads the following costs will be incurred (e) The company has signed a rental agreement for the production facility. The annual rentul charge will be $360,000, which will be paid in equal monthly instaliments. A security deposit amounting to $25,000 must also be paid in July (0) Other operating costs including power, insurance, and administration expenses, which must be paid monthly, are expected to be 893.600 for the year. Selling and administrative costs Marketing Campaign The company will launch an advertising campaign using social media, television, radier, and newspaper. This will cost $33,60) for three-month period payable in cqual installments from July Sales commission A 2% commission on projected sales in dollars will be payable for cash in the month incurred. Other selling and administrative expense Other selling and administrative expenses use the following cost function per quarter: y= $24,000 + 62x, where x represents budgeted sales in units. Other information (g) The prize money of $500,000 will be introduced at the commencement of the company's operations and should be treated as a cash inflow (capital/investment by owners). Beginning cash balance is nil. (h) The closing inventory as at 30th of September is $28,200 (i.e., raw material closing inventory is $5,154 and finished goods inventory is $23,046). () Klean Steppers is seeking $1,000,000 loan from Development Bank of Jamaica to purchase a new equipment costing $216,000 and assist with the operating expenses for its first year of operation. Interest rate on the loan is 12%. The principal and interest will be repaid in 4 installments at the end of each quarter. IV. Direct-material budget (42 marks) V. Schedule of cash disbursement to suppliers for direct material (12 marks) VI. Direct labour budget (16 marks)