Question 4 Bright Papers Ltd has established a new subsidiary company to produce extra-large rolls of wall-covering papers. Management forecast for the first four years of trading are as follows: Year 1 Year 2 Year 3 Year 4 Sales (in units) 800,000 950,000 1,200,000 1,500,000 Production (in unit) 850,000 1,000,000 1,300,000 1,600,000 10.56 11.04 12.00 Selling price per unit (GH) 10.20 Costs per unit (GH): Direct materials 2.04 Direct labor 0.60 Variable overhead 0.40 Total fixed overhead for the year 5,000,000 Average credit period given to 1 month customers Average credit period taken from 2 months suppliers of materials 2.28 0.75 0.50 5,100,000 1 month 2.64 0.90 0.60 5,200,000 1.5 months 3.00 0.90 0.60 5,300,000 2 months 1.5 months 1.5 months 1 month Further information a. Estimates for the average credit period given and taken are based on balances at the end of each year. b. Costs other than direct materials are to be paid for in the month they are incurred. c. The company will adopt the FIFO assumption in relation to cost of goods sold. d. No increase in production capacity will be required during the first four years of business. e. Fixed overhead costs include depreciation of GHS1,500,000 per annum. f. No inventory of direct materials will be held. The supplier will deliver goods daily, as required. No work-in-progress will exist at the end of any year. Required: Prepare annual cash budget for the new subsidiary for each of the first four years of trading