Required:

1. For the months of January, February, March and the quarter (total), prepare the:

a. schedule of expected cash collections,

b. schedule of expected cash disbursement for direct material purchases, and

c. cash budget.

2. Suppose that a unit of hairbrush requires 200 grams of blended plastic mixture (materials) and

0.1 hours of direct labour. Calculate the expected gross margin for the first quarter of 2020.

3. What is the principle objective of a cash budget?

SECTION B: PROBLEM QUESTIONS Answer ALL questions. QUESTION 1 Hazlett Company operates at capacity and makes plastic hairbrushes. Hazlett is preparing its cash budget for the first quarter of 2020 and has estimated sales based on past experience. The following information is gathered by the management accountant. However, some of the information is missing or incomplete, which requires further attention. January February March Budgeted sales (RM5 per unit) RM80,000 RM95,000 RM92,500 Budgeted direct material purchases (RM5 per kg) RM16,830 RM18, 790 RM17,520 Budgeted direct labour costs (RM10 per direct labour hour) RM16,300 RM18,950 RM18, 150 Allocation of manufacturing overhead cost (based on direct labour hours): Fixed RM10,680 RM10,680 RM10,680 Variable (RM0.20 per direct labour hour) Budgeted monthly operating expenses: Selling RM0.15 per unit sold General administration RM14,200 per month Statement of Financial Position as at 31 December 2019 RM RM Assets Cash 5,100 Account receivable 21,400 Less: Allowance for bad debts 900 20,500 Inventories Direct materials 5,600 Finished goods 8,000 14,200 Fixed assets 200,00 Less: Accumulated depreciation 50.200 149,800 Total assets 189,600 Liabilities Accounts payable 7,245 Insurance payable 6,500 Taxes payable 8, 700 Common stocks 100,000 Retained earnings 67.155 Total liabilities and equity 189,600 Ten percent of the sales are for cash. Of the credit sales, 60% are collected in the month of sales, 35% are collected the following month, and 5% are never collected and written off as bad debt. All purchases of materials are on account. Hazlett pays for 50% of purchase in the month of purchase and the remaining in the following month. All other operating costs are paid in the month incurred, including: - the declaration and distribution of a RM4,000 cash dividend in January, and the distribution of a RM5,000 cash donation in February. RM2,680 of the budgeted fixed manufacturing overhead costs, and 10% of budgeted general administration costs are allocation for depreciation. Hazlett plans to pay the taxes payable and insurance payable owed as of December 31, 2019 in the month of January. A new machine costing RM50,000 will be purchased in the month of February. Hazlett plans to pay a deposit of RM10,000 in the month of purchase, and the balance shall be paid in two equal instalments - in March and April Under new management, Hazlett is required to maintain a minimum monthly cash balance of RM10,000. If borrowing is necessary to meet the monthly cash balance requirement, Hazlett can apply for a short-term loan (0.5% interest per month) from KHF Bank in increments of RM1,000, up to a total loan balance of RM40,000. The repayment of the loan, including the interest, will be initiated when excess cash is available (assume the borrowing occurs at the beginning of the month and repayment at the end of the month). Required: 1. For the months of January, February, March and the quarter (total), prepare the: a. schedule of expected cash collections, C . schedule of expected cash disbursement for direct material purchases, and cash budget. 2. Suppose that a unit of hairbrush requires 200 grams of blended plastic mixture (materials) and 0.1 hours of direct labour. Calculate the expected gross margin for the first quarter of 2020. 3. What is the principle objective of a cash budget