Question 2

Makosah Company sales are 50% in cash and 50% on credit. Seventy percent of the credit sales are collected in the month of sale, 20% in the month following sale, and 5% in the second month following sale. The remainder is expected to be uncollectible. Selling price is GH 10

1. It is the policy of the company to maintain an open stock of finished goods which is equal to 25% of the previous months sales, and an ending inventory of 20% of the subsequent months sales.
2. It requires 1.5 Kg of material @ GH 2.5 and 1.5 Hrs. of labour at GH 2 to make a product. 45% of materials purchased are paid for in the month of purchase whiles the remaining is paid in the month following purchases
3. Wages are paid in the month in which they are incurred.
4. Makosah ltd received interest on investments of Ghs 3500 and Ghs 4500 respectively for October and December.
5. Dividend of 9000 is to be paid in December
6. Selling and administrative expenses are budgeted at GH10,000 and GH 12000 for October and November respectfully. Of these amount, GH3,000 is for depreciation. All cash selling and administrative expenses are paid in the month in which they are incurred.

7. The company must maintain a minimum cash balance of GH 9,000. An open line of credit is available from the companys bank to bolster the cash position as needed. Interest on borrowed funds is 25% p.a

The following are budgeted sales data:

	September	October	November	December	January
Total Sales (In Units)	2000	2800	2400	3200	4000

1. Prepare the sales budget for the last quarter of the year.
2. Prepare the Production budget for the last quarter of the year
3. Materials Purchase in Kilograms and in GH
4. Labour Utilization in Hours and in GH
5. Prepare a cash budget for last quarter. Indicate in the financing section any borrowing that will be needed during the month.