Scenario 1 Luxury Goods Pty Ltd is preparing a master budget for the quarter ending 30 September 2022 and has compiled the following data. The firm sells a single product at a price of $60 per unit. The sales forecast (in units) prepared by the marketing department for the quarter ending 30 June 2022 and the first 7 months of the next financial year is as follows.

40% of the sales are collected in the month of sale, 40% are collected in the following month, and 20% are collected in the second month following the sale. The beginning inventories on 1 July 2022 will be 10 800 units of finished goods and no raw materials. The ending finished goods inventory should equal 20% of the sales requirements for the next 3 months, and the raw materials ending inventory should equal 40% of the next months production. 80% of the material purchases are paid in the quarter of purchase and 20% are paid in the following quarter. The amount owing for purchases at 1 July 2022 is $196 800. Variable selling expenses are 5% of sales. Administrative expenses are $126 000 per quarter, of which $20 000 represents depreciation expense and $96 000 is wages. Fixed selling expenses are $36 000 each quarter. All selling and administrative expenses are paid in the quarter in which they are incurred. The production requirements are below.

The direct materials are purchased for $8 a kilogram. The direct labour wage rate is $24 an hour. The factory overhead cost is $154 000 per month and is paid in the month incurred (except for depreciation of $28 000). The 1 July 2022 cash balance is expected to be $40 320. Required: (Do the calculation in excel) (a) Prepare a sales budget by month for the period May to September 2022. (b) Determine estimated cash collections from receivables for the first quarter of the financial year ending 30 September 2022. (c) Calculate the number of units to be produced in the first quarter of the financial year ending 30 September 2022. (d) Prepare a direct materials budget for the first quarter of the financial year ending 30 September 2022. (e) Prepare a cash budget for the first quarter of the financial year ending 30 September 2022 including any necessary schedules. (f) Prepare a budgeted income statement for the first quarter of the financial year ending 30 September 2022. Scenario 2 William Bill is the production manager for Cheetah Motors Ltd and is responsible for preparing the production budget for the Cheetah car that the company manufactures. During the previous year, new robots were installed on the production line that significantly increased fixed factory overheads but reduced the amount of labour involved in production and the amount of material wasted due to improved efficiency. Page 4 of 6

OFFICI AL In preparing the production budget for the next year, William decided to cut himself a bit of slack. Because the cost structure of the production line had changed so much as a result of the new robots, William decided that in the first year of their introduction he would set a production budget that was easy to meet and management would not be able to recognise this as they couldnt compare it with previous production budgets. William received a bonus if positive production variances were greater than 10%. By not reducing the amount of labour or materials costs in the budget by the amount that the new robots should save, William believed he was in for an easy year with a guaranteed bonus at the end. (a) Who are the stakeholders affected by Williams budget? (b) What are the ethical issues involved? (c) How could the company stop its managers padding their budgets?

\begin{tabular}{lc} \hline & Number of units \\ \cline { 2 - 2 } April & 28800 \\ May & 28800 \\ June & 30000 \\ July & 31200 \\ August & 33600 \\ September & 33600 \\ October & 37200 \\ November & 38400 \\ December & 43200 \\ January & 57600 \\ \hline \end{tabular} \begin{tabular}{lccc} \hline & Direct materials & & Direct labour \\ \cline { 2 - 2 } \cline { 4 - 4 } Per unit & 1.1kg & & 0.5 hour \\ \hline \end{tabular} \begin{tabular}{lc} \hline & Number of units \\ \cline { 2 - 2 } April & 28800 \\ May & 28800 \\ June & 30000 \\ July & 31200 \\ August & 33600 \\ September & 33600 \\ October & 37200 \\ November & 38400 \\ December & 43200 \\ January & 57600 \\ \hline \end{tabular} \begin{tabular}{lccc} \hline & Direct materials & & Direct labour \\ \cline { 2 - 2 } \cline { 4 - 4 } Per unit & 1.1kg & & 0.5 hour \\ \hline \end{tabular}