KleanSteppers

A group of students at the University of Technology, Jamaica recently won an award in theannual UTech, Ja Business Model Competition for their invention, a white dirt-proof sneaker forchildren in kindergarten. This invention arose from complaints from parents about having to buywhite sneakers for their child/children for physical education that soils easily. As a result of theinvention,thestudentsdecided to startabusiness,'Klean Steppers'to startproduction.

The sneakers have an innovative design and are made of a robust leather and cushioningmaterial,which heightens the resistanceto dirtand dust.

Thefollowinginformation was discussed atameetingwith theKleanSteppers team.

Salesand collections

The sneakers are designed for girls and boys. Details of selling prices and projected sales in pairsofsneakersforthefour-month period areshownbelow:

Type	Sellingprice	Months
		July	August	September	October
Girls	$2500	250	290	320	190
Boys	$2900	195	230	280	160

It is expected that all sales will be on credit to department stores in Jamaica. It is estimated that30%of customers will paywithin onemonth while theremainingcustomers will paythe monthfollowingsale.

Production

Production of sneakers will be based on sales demand. The company requires a closing inventoryof 20% of the next month's budgeted sales in pairs of sneakers for girls and boys. There is noopeningstock of inventory.

DirectMaterialsandDirectlabour

1. The sneakers are made with special leather and specially treated rubber for the sole. Thematerialsand labour required tomakeeach pair ofsneakers are asfollows:

Typeofsneakers	Leather	Cushion	Labour
	$370permeter	$220permeter	$340perhour
Girls	0.6m	0.15m	15 minutes
Boys	0.4m	0.10m	12 minutes

The company requires a closing inventory of 10% of raw material required for thefollowingmonth'smaterialneeded.Therewasnoopeningstockofrawmaterial.Thecompany plans to have a closing inventory of leather of 6.2m and 13m of cushioningmaterialas at the30^thSeptember.

MaterialsarepurchasedfromacompanybasedintheCaymanIsland.Thissupplierrequiresthat 50% of the purchase total is paid for in cash with the order, and allows one month'screditfortheremainingamount.

1. Inkeepingwith governmentrequirements,biodegradable cardboardboxeswillbeusedtopackage the sneakers. Each box will cost $28.50 per box. The company will buy thepackagingmaterials froma Jamaican companyforcash each month.

1. To make girls' sneakers, each unit requires 15 minutes of direct labour hours and to makeboys'sneakerseachunit requires12minutesof directlabourhours.Thecompanypays$340perhour for eachdirect labourhour.Labourcosts arepaidin the monthincurred.

ManufacturingOverheads

1. Thefollowingmanufacturingoverheads arebudgeted forthe quarter.

	July	August	September
Indirectmaterial	$10,200	$11,200	$12,200
Indirectlabour	$4,800	$4,120	$4,280
Otheroverhead	$3,100	$2,400	$2,700
Depreciation	$1,800	$1,800	$1,800

In additiontotheabove overheadsthefollowingcostswillbeincurred:

1. The company has signed a rental agreement for the production facility. The annual rentalcharge will be$360,000,which will bepaid in equalmonthlyinstalments. A securitydepositamountingto $25,000 must also be paid in July.

1. Otheroperatingcostsincludingpower,insurance,andadministrationexpenses,whichmustbepaid monthly, areexpected to be $93,600 for theyear.

Sellingandadministrativecosts

MarketingCampaign

The company will launch an advertising campaign using social media, television, radio, andnewspaper. This will cost $33,600 for three-month period payable in equal instalments fromJuly.

Salescommission

A2%commissionon projectedsalesin dollarswillbepayable forcashin themonthincurred.

Othersellingandadministrativeexpense

Other selling and administrative expenses use the following cost function per quarter:y= $24 ,000+62x,wherexrepresents budgetedsales inunits.

Otherinformation

1. The prize money of $500,000 will be introduced at the commencement of the company'soperations and should be treated as a cash inflow (capital/investment by owners).Beginningcashbalanceis nil.
2. The closing inventory as at 30^th of September is $28,200 (i.e., raw material closing inventoryis$5,154 and finished goods inventoryis $23,046).
3. KleanSteppersisseeking$1,000,000loan fromDevelopmentBankofJamaicatopurchaseanew equipment costing $216,000 and assist with the operating expenses for its first year ofoperation. Interest rate on the loan is 12%. The principal and interest will be repaid in 4installmentsat theend ofeach quarter.

Requirements:

PrepareKleanSteppersmaster budgetformonthandintotal forthequarterbycompletingthefollowingschedules andstatements:

1. Salesbudget (12marks)

1. Scheduleofcashcollected fromcustomers (8marks)

1. Productionbudget (28marks)

1. Direct-materialbudget (42marks)

1. Scheduleofcashdisbursementtosuppliersfordirectmaterial (12marks)

1. Directlabourbudget (16marks)

1. Manufactureoverheadbudget (13marks)

1. Sellingandadministrativebudget (16marks)

1. Cashbudget (31marks)

1. CostofGoodsSold Budget(quarteronly) (5marks)

1. BudgetedIncomeStatement(quarteronly) (5marks)

BudgetedBalanceSheet (quarteronly) (12 marks)

Just answer the Selling and Administration Budget and the Cash Budget please