Looper Electronics produces and sells waterproof wireless earphones. Each pair of waterproof wireless earphones is sold at RM50. Ihsan Kamall, the assistant controller, is now preparing a monthly cash budget for the first quarter of 2020. In the process, the following information has been accumulated:

Account balances extracted from last year's Statement of Financial Position (as at 31 December 2019):

Cash = RM32,500

Account receivable = RM172,000

Accounts payable = RM84,000

Sales and production units for the quarter are estimated as follows (a unit refers to one pair of earphones):

January February March

Sales (in units) 15,000 16,500 18,000

Production (in units) 15,150 16,650 18,200

Credit sales typically are 70% of total sales. Looper's credit experience indicates that 50% of the credit sales are collected during the month of sale, 45% are collected during the following month and the remainder are uncollectable.

Total raw materials to be purchased for the quarter:

January February March

Raw materials costs RM306,000 RM336,100 RM364,000

Raw materials are purchased on account. Sixty percent of each month's purchases are paid during the month of purchase, and the remainder is paid during the following month.

Total direct labour costs (calculated based on RM20/hour) estimated for the quarter:

January February March

Raw materials costs RM151,500 RM166,500 RM182,000

The company allocates its variable manufacturing overhead at a rate of RM8 per direct labour hour.

Total budgeted fixed manufacturing overhead cost per month is RM80,000, of which this amount includes RM5,000 of depreciation.

Looper's other monthly expenses will be as follows:

Administrative salaries RM28,700

Advertising and promotion RM10,100

Depreciation - office furniture RM3,500

Sales commission 3% of sales

Ameenah Baseer, the president of Looper Electronics, has indicated that the company should invest RM105,000 in an automated inventory-handling system to control the movement of inventory in the company's warehouse just after the new year begins. The purchase of the system will be financed primarily from the company's cash.

The company needs to keep a minimum cash balance of RM30,000 per month. If borrowing is necessary, the short-term credit from MBank with a monthly interest rate of 1% is available. The interest on any short-term borrowing will be paid when the loan is repaid.

Looper's Board of Directors has indicated an intention to declare and pay dividends of RM10,000 on the last day of the first quarter.

Required:

a.Prepare:

i.a schedule of expected cash collection for each of the months of January, February and March.

ii.a schedule of expected cash disbursement for direct material purchases for each of the months of January, February and March.

iii.a cashbudget foreachofthe monthsofJanuary,February,March;andfor the quarter.

b.A master budget consists of operating and financial budgets.

i.Differentiate between an operating budget and a financial budget.

ii.List THREE examples of operating budgets.