Ltd. is a company that manufactures and sells a single product, which they call CA-Fen. For planning and control purposes they utilize a monthly master budget. Their fiscal year end is June 30.

Expected sales: For the year ended June 30, 2021: 950,000 units at $11.00 each *

For the year ended June 30, 2022: 1,000,000 units at $11.00 each

For the year ended June 30, 2023: 1,000,000 units at $11.00 each

*Expected sales for the year ended June 30, 2021 are based on actual sales to date and budgeted sales for the duration of the year. Sales in May 2021 are expected to be $1,045,000; sales in June 2021 are expected to be $104,500.

Your investigations of the companys records have revealed the following information:

1. Peak months for sales correspond with gift-giving holidays. History shows that January, March, April and June are the slowest months with only 1% of sales for each month. Sales pick up over the summer with July, August and September each contributing 2% to the total. Valentines Day in February boosts sales to 5%, and Mothers Day in May accounts for 10%. As Christmas shopping picks up momentum, winter sales start at 15% in October, move to 20% in November and then peak at 40% in December.

2. From previous experience, management has determined that an ending inventory equal to 50% of the next months sales is required to fit the buyers demands and production capacities.

3. Because sales are seasonal, Caphen must rent an additional storage facility from September to December to house the additional inventory on hand. The only related cost is a flat $100,000 per month, payable at the beginning of the month. (Hint: this is considered a selling cost, not a manufacturing cost.)

4. Two different materials are used in the production of the AA-Fen.

Direct Material Units/T-one Cost/Unit

W123 0.1 cu. metre $10.00 per cubic metre

P456 5 grams $0.25 per gram

The supplier for W123 is located just two blocks away, so Caphen has reached an agreement with them to take possession on a JIT (just in time) basis. Caphen maintains no inventories of W123. All purchases of W123 are on credit. Caphen pays for 75% of these purchases in the month of purchase and the remaining 25% in the following month.

P456 is a very compact material that is purchased in powder form. The supplier of P456 tends to be somewhat erratic so Caphen finds it necessary to maintain an inventory balance equal to 40% of the following months production needs as a precaution against stock-outs. Caphen pays for 10% of a months purchases in the month of purchase, 55% in the following month and the remaining 35% two months after the month of purchase.

5. Beginning accounts payable consists of $38,941 arising from the following direct material purchases in May and June2021:

W123 purchases in June2021: $ 3,688

P456 purchases in May2021: $16,297

P456 purchases in June2021: $18,956

6. Caphens manufacturing process is highly automated, so its direct labour is low. Employees are paid on a per unit basis. Therefore, the total payroll each month is dependent on the number of units produced. An employee spends an average of 15 minutes on each unit. The average wage is $15.75 per hour which includes vacation and the employers share of benefits.

7. Variable manufacturing overhead is allocated based on units produced. The unit variable manufacturing rate is $2.00.

8. The fixed manufacturing overhead costs for the entire year are as follows:

Training and development $ 42,000

Property and business taxes 141,000

Depreciation on equipment 147,000

Insurance 192,000

Other 27,000

$ 549,000

Property and business taxes, and the annual insurance premium, are paid in July each year. Training & development and other fixed manufacturing overhead costs are incurred evenly over the year and paid as incurred.

9. Selling and administrative expenses are known to be a mixed cost; however, there is a lot of uncertainty about the portion that is fixed, or the variable rate. Previous years experience has provided the following information:

Lowest level of sales: 774,600 units Total selling & admin expenses: $1,321,998

Highest level of sales: 1,393,500 units Total selling & admin expenses: $1,711,905

This is for the whole year and these costs are in addition to the rental costs mentioned (see point 3), and bad debts expense (see point 10).

10. Sales are on a cash and credit basis, with 60% collected during the month of the sale, 30% the following month, and 9.5% the month thereafter. of 1% of sales are considered uncollectible (bad debt expense).

11. Based on the above collection pattern, and the previously mentioned expected sales in May and June 2021, it is estimated the company will have Accounts Receivable of $140,553 at June 30,2021 which will be collected in July and August 2021.

12. During the fiscal year ended June 30,2022, Caphen will be required to make monthly income tax installment payments of $10,000. Outstanding income taxes from the year ended June 30,2021 must be paid in August 2021. Income tax expense is estimated to be 40% of net income. Income taxes for the year ended June 30,2022 in excess of installment payments will be paid in August 2022.

13. Caphen is planning to acquire additional manufacturing equipment for $252,000 cash. One half of this amount is to be paid in September 2021, the other half in October 2021. The manufacturing overhead costs above already include the depreciation on this equipment.

14. An arrangement has been made with the local bank that if Caphen maintains a minimum balance of $20,000 in their bank account, they will be given a line of credit at a preferred rate of 6% per annum. All borrowings are done at the beginning of the month, repayments at the end of the month. All borrowings and repayments from the bank should be in multiples of $1,000. Interest is paid at the end of each month and is calculated on the balance at the beginning of the month, including any new borrowings.

15. Caphen has a policy of paying dividends at the end of each quarter (March 31, June 30, September 30, and December 31). The president tells you that the board of directors is planning on continuing their policy of declaring dividends of $50,000 per quarter.

15. A listing of the estimated balances in the companys ledger accounts as of June 30,2021 is given below:

Cash	$ 320,214	Accounts payable	$ 38,941
Accounts receivable	140,553	Income taxes payable	115,000
Inventory-raw materials	10,000	Share capital	1,000,000
Inventory-finished goods*	87,365	Retained earnings	874,191
Long-lived assets (net)	1,470,000
	$2,028,132		$2,028,132

* using absorption costing

Question

Prepare, in a master monthly budget for Caphen Ltd, for the year ended June 30, 2022, including the following schedules (with a total column in each):

1. Cash Budget