QUESTION $3(20$ Marks$)$

REQUIRED

Use the information provided below to prepare the following for August and September $2024$:

$3\mathrm{.}1$ Debtors Collection Schedule $(4$ marks$)$

$3\mathrm{.}2$ Cash Budget $(16$ marks$)$

INFORMATION

Nissa Limited is planning its business activities for August and September $2024.$ The bank account is expected to reflect an overdraft of R$50000$ on $31$ July $2024.$ The following forecasts have been made by

Nissa Limited:

$1.$ The sales manager anticipates the following sales volumes of finished goods at a constant price of R$320$ per unit:

July August September October

$2300$ units $2900$ units $3100$ units $3300$ units

Sixty percent $(60\%)$ of the sales is expected to be on credit and the collections are expected to be as follows:

$30\%$ is collected in the month of the sale and these debtors are entitled to a $5\%$ discount.

$70\%$ is collected in the month after the sale.

The balance of the sales is for cash.

$2.$ The expected unit primary costs of production are as follows:

Direct materials $-$ R$80$ per unit

Direct labour $-$ R$70$ per unit

$3.$ Management aims to maintain a month$-$end inventory of finished goods of $10\%$ of the expected sales of the following month. Materials are purchased for cash to meet the production requirements of each month. $($Hint: Prepare a production budget first to determine the production requirements.$)$

$4.$ Direct labour costs are incurred in line with production and are paid in the month in which they were incurred.

$5.$ Variable overheads are budgeted at R$30$ per unit produced. Fixed overheads are estimated to be R$120000$ per month. Overheads are payable in the month in which they are incurred. $($Separate entries are required for fixed and variable overheads.$)$

$6.$ R$250000$ cash will be spent on the purchase of a vehicle during September $2024.$

$7.$ The company intends investing $10\%$ of the total sales value $($before any discounts$)$ of each month in an investment account from August $2024$ to finance the modernisation of its machinery during $2025.$

$8.$ As from August $2024,2\%$ of the total sales revenue $($before any discounts$)$ will be utilised for research and development. These costs are payable in the month after they are incurred.