question b

QUESTION 4 A company is preparing budgets for the next financial year. The estimated sales for the first four months of the next financial year are as follows: Month Units sold July 12,000 August 14,000 September 11,000 October 12,000 40% of each month's sales units are to be produced in the month of the sale and the balance i.e. 60% of each month's sales will be produced in the previous month. 50% of the direct materials required for each month's production will be purchased in the previous month and the balance in the month of production. The direct material cost per unit is 9/unit (3kg @ 3/kg). REQUIRED: (a) Prepare the production budget in units for August and September. (4 marks) (b) Explain and compare the net present value and the internal rate of return as methods to evaluate an investement project. [6 marks)