Problem 4: Budgeting (18 marks) The Great Company (TGC) manufactures and sells plastic bottles. TGC commenced operations on November 1, 2021. For the budgeted period January to March 2022, each bottle will be sold for $5.60 and product costs will be $3.00 per bottle. Product cost analysis shows 50% relates to direct material, 30% relates to direct labour, and 20% relates to manufacturing overhead. Management have provided their budgeted sales target as shown below: Month (2021) Actual Sales ($) November $60,000 December $115,000 Month (2022) Budget Sales ($) January 128,800 February 112,000 March 64.400 Approximately 60% of sales are collected immediately and are paid by credit card. At time of transaction, the bank charges a 4% administration fee for providing the credit card terminal and services. Approximately 25% of sales are collected in cash one month after the sale and 10% of sales are collected in cash two months after the sale. The remaining 5% is uncollectable. IGC does not hold any inventory all units manufactured are sold before the last day of each month. Suppliers are paid 100% of amount due a month following the purchase. Management pay the sales team a commission based salary calculated as 15% of sales collections. Payment to sales team is made at the same time the customers pays. All other costs are paid in the month of incurred. The Company plans to purchase a delivery truck for $120,000 in the beginning of February, and will fund 30% of the cost from cash on hand. The remainder is financed by a bank via a truck loan with a 12% per annum interest rate. The truck loan is interest only monthly payments till February 2025. Management uses straight line depreciation method and the policy is to depreciate vehicles at 25% per annum (equivalent to $2,500 depreciation per month).An abstract of December 2021 month end balance sheet is as follows: Assets (S) Cash 75,000 [Accounts Receivable] * 55,000 Prepayments 5,000 Fixed Assets 100.000 Total Assets 235.000 Liabilities (S) Accounts Payable 25,000 Interest only term loan maturing 50,000 Dec 2024 (15% per annum) Total liabilities 75,000 Equity 160,000 Total Equity and Liabilities 235,000 **note: no bad debt has been written off yet. Required: a) Prepare a summary of cash collections for January to March. (6 marks) b) Prepare a summary of cash disbursements for January to March. (8 marks) c) Management have been concerned about budgeting slack that may exist in the above budget. Discuss TWO reasons why budgeting slack may exist for The Great Company. (4 marks) [TOTAL: 18 MARKS]