Question 2 (20 marks) LH Limited produces only 1 product. The company accountant is now preparing the cash budget for the 2nd quarter of 2021 with the following information. (i) The company are with the following balance as at 31 March 2021: Cash Account receivables Direct materials inventory (600kg) Machinery, net book value 265,040 440,000 15,000 108,000 200,000 Accounts Payable (ii) Actual and estimated sales level: March 2021 (Actual) April 2021 (Estimated) $400,000 $576,000 May 2021 (Estimated) $748,800 June 2021 (Estimated) $842,400 80% of the sales are on credit basis. 70% of the credit sales would be settled in the following month after sales and the remaining balance one month later. The selling price is maintained at $400 per unit. For budgeting purposes, it is assumed that no inventory will be kept for finished goods and work-in-progress at the end of each month. (iii) Each unit of the product requires 8 kg of direct material at $25 per kg, and 30 minutes of direct labor at $80 per hour. There is expected a 10% abnormal loss of material input and no effect on other production costs. (iv) The total monthly production overheads are fixed. The normal production capacity is 2,200 units per month in 2021. Per unit production overheads is expected to be $28. Monthly depreciation for machinery is $5,600. Production overheads are to be paid in the month incurred. (v) Monthly non-production expenses: Salaries for administrative staff Office rent Sales commission Other operating expenses The expenses are to be paid in the month incurred. $100,000 $50,000 10% of sales $5,000 (vi) Sales training courses costing $50,000 will be held by a training company for some staff in May 2021. A down payment of 60% of the training fee is to be paid in April and the remaining balance will be settled upon completion of the training. The administrative staff will take up part of the sales work and the sales commission will be decreased to 5% of the sales starting from June 2021.