Outhouse Limited manufactures and sells garden sheds for $915. At the end of June, the following actual and expected sales numbers were provided: June (actual) July August September October Sales (units) 400 450 300 400 700 Each shed requires 20 square metres of sheet metal at a cost of $24 per square metre, and requires three hours of direct labour to be manufactured. The direct labour cost is $18 per hour. The finished goods ending inventory for each month is required to be 28% of next month's forecast sales, while the raw materials ending inventory for each month is required to be 50% of the requirements for next month's budgeted production. Finished goods and raw materials inventories at the end of June are 150 units and 3,100 square metres respectively. The business collects 50% of receivables in the month of sale and the remainder in the following month. 60% of the cost of raw materials is paid in the month of purchase and the remainder in the following month. The amount owing for purchases at the beginning of July is $50,000. In addition to raw materials and direct labour, the business has the following monthly expenses: Variable selling expenses of 5% of sales; fixed administration expenses of $12,000 including depreciation of $2,000 and wages of $9,500; and factory overheads of $20,000 including depreciation of $5,000. The business pays all cash amounts owing for these expenses in the month incurred. Outhouse Limited had a cash at bank balance of $100,000 at the end of June. Required: a) Prepare a sales budget by me K 2/ 2ptember. (8 marks) Each shed requires 20 square metres of sheet metal at a cost of $24 per square metre, and requires three hours of direct labour to be manufactured. The direct labour cost is $18 per hour. The finished goods ending inventory for each month is required to be 28% of next month's forecast sales, while the raw materials ending inventory for each month is required to be 50% of the requirements for next month's budgeted production. Finished goods and raw materials inventories at the end of June are 150 units and 3,100 square metres respectively. The business collects 50% of receivables in the month of sale and the remainder in the following month. 60% of the cost of raw materials is paid in the month of purchase and the remainder in the following month. The amount owing for purchases at the beginning of July is $50,000. In addition to raw materials and direct labour, the business has the following monthly expenses: Variable selling expenses of 5% of sales; fixed administration expenses of $12,000 including depreciation of $2,000 and wages of $9,500; and factory overheads of $20,000 including depreciation of $5,000. The business pays all cash amounts owing for these expenses in the month incurred. Outhouse Limited had a cash at bank balance of $100,000 at the end of June. Required: a) Prepare a sales budget by month for the period June to September. (8 marks) b) Prepare a schedule of cash collections by month for the period July to September. (7 marks) c) Prepare a production budget by month for the period July to September. (8 marks) d) Prepare a direct materials budget for July and August (7 marks) e) Prepare a direct labour budget for July and August. (7 marks) f) (8 marks) Prepare the cash budget for July. K 2/2
