Question 1 (25 Marks)

Green Enterprises Ltd is preparing to set up a new business on the first of January 2021 to manufacture a single product. Below is the sales budget for the company for the first 6 months of 2021.

Sales Budget

	January	February	March	April	May	June
Sales Unit	8 000	8 500	10 000	11 000	11 500	10 500
Sales Revenue	240 000	255 000	300 000	330 000	345 000	315 000

Additional Information;

1. The Cash collections patterns from sales is expected to be as follows:
   1. Cash Customers 30% of sales revenue will be for immediate cash
   2. Credit Customers 70% of sales revenue will be from credit customers. These debtors will pay their bills, 50% in the month after sales and the reminder in the second month after sales.
2. Stocks of finished goods are maintained 60% of the following months sales requirement, and the budgeted cost of a unit of finished goods is valued at N$ 20.
3. The product requires 4 kg of material X which cost N$ 1.5 per kg, it is expected that this price will increase with five cents from April.
4. One month`s credit is received from suppliers.
5. Stock of raw materials sufficient for 10% of the following month`s requirement in kgs are held at the end of each month.
6. One month`s credit is received from suppliers.
7. Expenses of the business will be settled as follows;
   1. Expected Costs Wages N$ 20 000 per month payable as incurred. Variable Overheads of N$ 5 per Unit is payable as incurred.
   2. There will be an Equipment to be purchased on 01 January 2021 it cost N$ 30 000, this equipment is expected to have a useful life of 5 years. To finance this purchase, a loan of N$ 24 000 will be secured from Development Bank of Namibia at 10% per annum. Interest is payable monthly, but capital loan repayment will not commence until July 2021.

REQUIRED:		Marks
1.3.	Prepare a budgeted Trading Profit and Loss Account for the four months ending April 2021	13