The company has decided that security lights (new Product) selling price of product is 750 oer unit, total sales - 1500 units total budgeted sales is: November- 500 units, December 500 units and January 500 units. The company has just concluded a deal to get a bank loan of 19,000 on the 1st November 2022. The interest on this loan will be paid every month. The company will be required to make 12 equal payments to repay the loan starting from the end of December.

From their costs estimates, total fixed cost estimated to be 110,200 and it will be shared equally throughout the period. The variable cost is 230 per unit. The fixed costs are for the whole period, so they are not affected by the level of service. However, the variable costs will increase with services output (ie sales output multiplied with variable cost per product).

Variable cost will be paid on the basis of 60% in the month of purchase and 40% the following month. Similarly, revenue from the sale of new security light will be on the basis of 60% cash in the same month, and the remaining 40% credit to be paid the following month.

One of the other products that JKL Ltd has been producing is the Basic lights for which you have been provided with the following information:

Sales Revenue -30

Direct labour (1 hour) -(10)

Direct material (1 kg) -(8)

Fixed overheads- (3)

Standard profit -9

The budgeted output for the previous quarter was 800 units of the Basic Lights; the actual output was 850 units, which was sold for 32,000. There were no inventories at the start or end of the previous quarter.

The actual production costs were:

Direct labour (840 hours) - 1100

Direct materials (1,200 kg)- 9500

Fixed overheads- 2900

The use of management tools such as Budgets and variance analysis. A computation of your cash budget for the first 3 months. Produce a variance statement showing the direct labour, direct materials, fixed overheads and sales variances.