The ABC Company manufactures and sells a seasonal product that has peak sales in the third quarter.

The following information concerns operations for year 2 - the coming year and for the first two

quarter s of year 3

a. The company's single product sells for BD: 10 per unit. Budgeted sale in units for the next six

quarters are as follows (sales are on credit )

Year 2 quarter

year 3 quarter

1 2 3 4 1 Budgeted unit sales -

50000

80000

60000

120000

75000

2 90000

Sales are collected in the following pattern: 75% in the quarter the sales are made, and the

b.

remaining 25% in the following quarter. On January 1, year 2, the Compnay's balance sheet

showed BD: 70000/- in accounts receivable, all of which will be collected in the first quarter of

the year. Bad debts are negligible and can be ignored.

The company desires an ending finished goods inventory at the end of each quarter equal to 35%

c.

of the budgeted unit sales for the next quarter. On December 31, year 1 the company had 14,000

units on hand.

d. Six pounds of raw materials are required to complete one unit of product. The company requires

ending raw materials inventory at the end of each quarter equal to 10 of the following quarter's

production needs. On December 31, Year1, the company had 24,000 pounds of raw materials on

hand.

e. The raw material cost BD:0.900 per each. Raw materials purchases are paid in the following

pattern: 60% paid in the quarter the purchase are made, and the remaining 40% paid in the

following quarter.On January 1, year 2, the comparny's balance sheet showed BD: 8o000 in

Accounts payable for raw material purchases, all of which will be paid for in the first quarter of

the year.

Required

Prepare the following budgets and schedules for the year, showing both quarterly and total figures

1. A sales Budgets and schedule of expected cash collections

2. A production Budget

3. A direct materials budget and a schedule of expected cash payments for purchase of materials.

4. The principle purpose of cash budget is to see how much cash the company will have in the

bank at the end of the year". Do you agree ? Explain.