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Question 3 Sunset Corp manufactures a single product, which has the foliowing standard revenue and cost data: 1 Selling Price $14.00 per unit i Materials 2 kg per unit at $2.60 per kg. Labour $2 per unit . Direct expenses = $1.40 per unit Sales in Dec 2018 and Jan 2019 are forecasted to be 10,000 units in each month. As a result of direct marketing expenditure of $90,000 in Feb 2019, sales are expected to grow by 10% in Feb 2019 and thereafter to increase by 1,000 units in each month from March to June. Sales after June 2019 are expected to remain constant. 25% of sales are on cash terms and 75% of sales are expected to be collected in the month following the sale. Inventory of finished goods at the end of each month are required to meet 20% of the expected sales for the following month. Inventory of materials at the end of each month are required to be equal to 50% of the materials required for the following month's production. Materials are paid for in the month following purchase. All other costs are paid for in the month in which they occur. Overheads for production and admin will be $22,000 per month, excluding $10,000 of depreciation per month. Sunset Corp. has a $700,000 bank loan at 7% interest per annum, on which it pays interest twice per year, in March and September. The cash balance at the end of Dec 2018 is expected [0 be $70,000. Sunset Corp has a policy of maintaining at least $50,000 in its bank balance at the end of each month. Required: Prepare and construct the foilowing monthly budgets for Sunset Corp for the three months from January 2019 to March 2019: (a) Production budget in units. (3 marks) (b) Cash budget. (1 7 marks) (6) Does the cash budget reveal any issue that Sunset Corp may face? Suggest two (2) possible ways for Sunset Corp to improve its cashow. (5 marks) - END OF PAPER