Question 4 (14 marks)

Assume that you are the Management Accountant for a merchandising company which sells disposable masks bought from a supplier overseas.

Additional Information

Forecast Sales Volume is shown as below

Forecasted sales	Disposable Masks (in boxes)
Dec 2021	3,900
Jan 2022	4,250
Feb 2022	3,300
Mar 2022	4,000

• Assume that the selling price and cost price of 1 box of disposable mask remains unchanged from Dec 2021 to Mar 2022.
• At the end of each month there is enough inventory (in boxes) to cover 40% of the next month's sales.
• Selling and Administrative Expenses is expected to remain constant at $7,000 per month.
• Determine the cost price and selling price per box by researching online. State your assumptions and cite your sources clearly.
• Forecast sales for April is expected to be 4,500 boxes.

You are required to do the following

Prepare the:

i) Purchases Budget (in dollars) and;

ii) Budgeted Income Statement

For January to March 2022 (3 months), based on the information above.

[8 marks]

Provide one (1) explanation on why preparing a Financial Budget would also be beneficial for your company.

[2 marks]

Jake, the Director of the Human Resource department says that "Budgeting can sometimes lead to lower profits as it may affect human behavior negatively". Provide one (1) example when this can be possible.

[2 marks]