Sg Pusu Nursery (SPN) has been in the plant nursery business for more than 10 years. The business is affected by the lockdown during the pandemic and is picking up very slowly. Fortunately, when the lockdown is eased in September 2021, a national horticulture association has agreed to purchase seeding bags from the nursery for the last three months of 2021. At the same time, the nursery also plans to sell the seeding bags via online platforms, such as Lazada and Shopee. Mr Muiz, the owner of SPN, feels that he must carefully plan its expenses as the business now has very limited financial resources. As part of the community engagement, you have willingly drafted the financial planning for the seeding bag sales of SPN as follows:

1. Expected sales of the seeding bags:

Months	October	November	December	January 2022
Sales units	8,000	10,000	12,000	14,000

2. The selling price of the seeding bag is RM15 per unit. At the end of each month, SPN plans to always have seeding bags ready at the nursery, 10% of the sales of the following month.

3. The details of material required in the production of the seeding bags:

Material	Soil X
Quantity per seeding bag	1.5kg
Price per kg	RM2
Ending inventory	5% of following month production needs
Inventory on 1st Oct 2021	763kg

4. SPN plans to hire workers who are not only able to produce the seeding bags but also able to handle the sales. The wages for the labour consist of a basic rate of RM6 per hour and sales commissions of RM1.50 for each seeding bag sold. Each worker is expected to spend 15 minutes to produce a unit of seeding bags.

5. SPN also has to rent an extra plot of land adjacent to the current location. The monthly rate is RM1,000 per month. SPN is also expected to spend packaging costs of RM2 per unit of seeding bag sold.

Required:

1. Prepare the following budgets for each month in the fourth quarter 2021 and the total for the quarter:

1. Production units;

2. Direct material purchase costs;

3. Direct labour costs; and

4. Sale and Administrative expenses.

(21 marks)

2. Describe briefly how budgets help to sustain business operations.

(4 marks)

(Total: 25 marks)