PART B Structured Question

Question

(35 marks)

Alfred Limited manufactures and sells cotton gauze. Expected sales of gauze (in boxes) for upcoming

months are as follows:

June

July August September October November December

36,000 40,000 50,000 38,000 30,000 24,000 35,000

The sales price per unit of gauze per box is RM20. 50% of the sales are made in cash and another 50% is on account (on credit). The collection pattern of the 50% of on account sales is collected 20% in the month of sales and 80% of the on account sales is collected in the following month of sales.

For the production, the management likes to maintain a finished goods inventory equal to 25% of the next month's estimated sales.

Required:

a. Prepare a Sales budget and Expected Cash Collection Budget for the third quarter (July, August,andSeptember). (10 marks)

b. Prepare the company's production budget for the third quarter (July, August, and September). Include a column for each month and a total column for the entire quarter. (10 marks)

c. Evaluate the use of budgeting in fast-changing, especially those that are effect by the external environment (PESTLE). (15 marks)