Question 5 Part A The following information pertains to Amigo Corporation: Month July August September October November December Sales $30,000 34,000 38,000 42,000 48,000 60,000 Purchases $10,000 12,000 14,000 16,000 18,000 20,000 Cash is collected from customers in the following manner: Month of sale (2% cash discount)30% Month following sale 50% Two months following sale 15% Amount uncollectible 5% 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Required: a. Prepare a summary of cash collections for the 4th quarter. (5 Marks) b. Prepare a summary of cash disbursements for the 4th quarter. (3.5 Marks) Part B The Deluxe Motorcar in northern California manufactures motor cars of all categories. Its budgeted sales for the most popular sedan model XE8 in 20x8 is 4,000 units. Deluxe Motorcar has a beginning finished inventory of 600 units. Its ending inventory is 450 units. The present selling price of model XE8 to the distributors and dealers is $35,200. The company does not want to increase its selling price in 20x8. Deluxe Motorcar does not produce tyres. It buys the tyres from an outside supplier. One complete car requires five tyres including the tyre for the extra wheel. The company's target ending inventory is 400 tyres, and its beginning inventory is 350 tyres. The budgeted purchase price is $45 per tyre. Required: 1. Compute the budgeted revenues in dollars. (1.5 Marks) 2. Compute the number of cars that Deluxe Motorcar should produce. (2.5 Marks) 3. Compute the budgeted purchases of tyres in units and in dollars. (3.5 Marks) 4. What actions can Deluxe Motorcar's managers take to reduce budgeted purchasing costs of tyres assuming the same budgeted sales for Model XE8? (3 Marks) 5. Describe some of the drawbacks of using the operating budget as a control device. (3 Marks) 6. Describe the concept of kaizen budgeting