The estimated sales in cakes for Nasser Bakery for the period January to May are as follows:

January	600
February	500
March	700
April	800
May	900

The selling price of each cake is AED88. All sales are on credit with 50% of sales to be collected in the month of sale, 42% in the month following the sale and the remaining 8% to be considered as uncollectible. Sales for December were AED50,000.

The company maintains finished goods inventories equal to 45% of the following month's sales. Each cake requires 8 pounds of ingredients. The company requires that the ending inventory of ingredients be equal to 40% of the following month's production needs. The ingredients cost AED7.50 per pound.

The company pay 70% of a month's purchases of ingredients in the month of purchase and the remainder is paid in the following month. The accounts payable on December 31 were AED19,000.

1. Prepare a sales budget, by month and in total, for the first quarter. Show your budget in both units and AED. (5 marks)

2. Prepare a schedule of expected cash collections, by month and in total, for the first quarter. (12 marks)

3. Prepare a production budget for each of the period January to April. (15 marks)

4. Prepare a direct materials budget, by month and in total, for the first quarter. (18 marks)

5. Prepare a schedule of expected cash disbursements for materials, by month and in total, for the first quarter. (15 marks)

6. Prepare a cash budget (20 marks) for the first quarter taking into consideration the following:

Rent of AED2,000 will be paid each month

Wages and Salaries expenses are AED3,000 each month

New equipment costing AED4,000 will be purchased and paid for in January.

Minimum cash balance of AED20,000 is required at the end of each month

The company has an agreement with a local bank that allows it to borrow in increments of AED1,000 (i.e. if they need AED3,500 they will have to borrow AED4,000) at the beginning of month. The interest rate on these loans is 12% per year. The company would repay the loan plus accumulated interest at the end of the quarter, provided the minimum cash balance requirement is met.

The beginning cash balance on January 1 was AED24,000.