Leitner Manufacturing, Inc. produces control valves used in the production of oil field equipment. The control valves are sold to various gas and oil engineering companies throughout the US Projected sales in units for the coming four months are as follows: January 20 000 February 25 000 March 30 000 April 30 000 The following data pertain to production policies and manufacturing specifications followed by Leitner: a. Finished goods inventory on 1 January is 13 000 units. The desired ending inventory for each month is 70% of the next month's sales. The data on materials used are as follows: b. b. The data on materials used are as follows: Direct material Per-unit usage Unit cost Part 714 5 Part 502 3 R4 R3 C. Inventory policy dictates that sufficient materials be on hand at the beginning of the month to produce 50% of that month's estimated sales. This is exactly the amount of material on hand on 1 January. The direct labour used per unit of output is 2 hours. The average direct labour rate per hour is R15. d. Each month, overhead estimates are based on direct labour hours. Fixed cost component Variable cost component Supplies R1.00 Power R0.20 Maintenance R28 000 R1.10 Supervision R14 000 Depreciation Taxes Other R100 000 R7 000 R56 000 R1.60 e. Monthly selling and administrative expenses are also estimated based on units sold. Fixed costs Variable costs Salaries R30 000 Commissions R0.75 Depreciation R5 000 Shipping R2.60 Other R10 000 R0.40 f. The unit selling price of the control valve is R90 In February, the company plans to purchase land for future expansion. The land costs R90 000 h. All sales and purchases are for cash. Cash balance on 1 January equals R162 900. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid one month later, as is the interest due. The interest rate is 12% per annum. Required: Prepare the following for the first quarter: 1.1 1.2 1.3 1.4 1.5 1.6 Sales budget Production budget Direct materials purchases budget Direct labour budget Overhead budget Selling and administrative budget 1.7 1.8 1.9 1.10 Ending finished goods inventory budget Cost of goods sold budget Budgeted income statement (ignore taxes) Cash budget