QUESTION THREE: BUDGETING FOR PLANNING AND CONTROL Part A Dante Ltd prepares annual budgets. The following beginning and ending inventory levels (in units) are planned for next year 1 January 31 December 193000 kg Direct material 53 000 kg 33 000 units Work in process 43 000 units Finished goods 313 000 units 193 000 units Three kilograms of direct material are required to produce each unit of finished product Required: (a) If Dante Ltd plans to sell 946 000 units during the year, calculate the number of units the company will need to manufacture (2 marks) (b) If Dante Ltd plans to manufacture 1 130 000 finished units during the year, determine the amount of direct material that needs to be purchased. (5 marks) Note: Question (a) and (b) are independent of each other Part B The following information is available from the financial records of Pascoe Ltd Month Sales Purchase 354,000 204,000 $234,000 April 324,000 May 174,000 294,000 une uly 384,000 $264,000 Additional information: Receipts from customers are normally 65 per cent in the month of sale, 25 per cent in the month following the sale, and 8 per cent in the second month following the sale. The balance . is expected to be uncollectable Pascoe takes full advantage of the 1 per cent discount allowed on purchases paid for by the 10th day of the following month Purchases for August are budgeted at $594,000, and sales for August are forecast at $654,000. Question 3 continued over Page 4 of 10 MBS Question 3 continued .Cash payments for expenses (other than purchases) are expected to be $132,000 for the month of August. Pascoe's cash balance on 1 August was $214,000. Required: (a) Prepare a cash budget for Pascoe for August that includes: Expected cash receipts during August Expected cash payments during August Expected cash balance on 31 August. 9 marks) (b) Explain the behavioural consequences of budgeting. In your answer, make specific mention of participative budgeting, budgetary slack, and budgetary difficulty (4 marks)