Value Products Ltd manufactures a single product. It is preparing the monthly budgets for the next half-year period from July to December 20XX. The following standard revenue and cost data is available: Selling price: $12.00 per unit Direct material: 2 kg per unit at $2.40 per kg Direct labour: $1.80 per unit Direct expenses: $1.20 per unit The sales forecast in June and July are 10,000 units in each month. As a direct result of planned marketing expenditure of $95,000 in August, sales are expected to be 11,000 units in August and to increase by 1,000 units in each month from September to December. Sales after December are expected to remain at the December level. 25% of sales are paid for when they occur (cash sales) and 75% of sales are paid for in the next month after sale (credit sales). Inventories of finished goods at the end of each month are required to be 20% of the expected sales for the following month. Inventories of materials at the end of each month are required to be 50% of the materials needs for the following months production. Payments for direct material purchases are made in the next month after purchase. Direct labour wages and direct expenses are paid for in the month in which they occur. Fixed manufacturing overheads for production, administration and distribution will be $34,000 per month, including depreciation of $12,000 per month. These overheads are payable in the month in which they occur. The company has a $750,000 bank loan at 8% per annum on which it pays interest twice per year, in March and September. The cash balance at the end of June is expected to be $50,000. Required: Prepare the following budgets for Value Products Ltd on a month-by-month basis for the six-month period from July to December 20XX: (a) Sales Budget (units and revenues) (b) Cash Collections (receipts) Budget (c) Production Budget (units) (d) Direct Material Usage and Purchase Budget (units and costs) (e) Cash Budget

My question is that in this solution, in the cash budget table, how did the values in the opening balance section was computed? I am really confused. Can someone please make me understand how each values in the opening balance section of the cash budget came to be?

Thank You

(a) Sales Budget for the period from Julv to December 20XX (d) Direct Material Usage and Purchase Budgets for the period July to December 20XX \begin{tabular}{|c|c|c|c|c|c|c|c|c|} \hline & Jun & Jul & Aug & Sep & Oct & Nov & Dec & Total \\ \hline Production (units) & 10,000 & 10,200 & 11,200 & 12,200 & 13,200 & 14,200 & 15,000 & 76,000 \\ \hline Materials per unit (kg) & 2 & 2 & 2 & 2 & 2 & 2 & 2 & 2 \\ \hline Materials to be used (kg) & 20,000 & 20,400 & 22,400 & 24,400 & 26,400 & 28,400 & 30,000 & 152,000 \\ \hline Add: Ending inventories (kg) & 10.200 & 11,200 & 12.200 & 13.200 & 14,200 & 15,000 & 15,000 & 15,000 \\ \hline Total needs (kg) & 30,200 & 31,600 & 34,600 & 37,600 & 40,600 & 43,400 & 45,000 & 167,000 \\ \hline Less: Beginning inventories (kg) & 10.000 & 10.200 & 11.200 & 12.200 & 13.200 & 14,200 & 15,000 & 10.200 \\ \hline Materials to be purchased (kg) & 20,200 & 21,400 & 23,400 & 25,400 & 27,400 & 29,200 & 30,000 & 156,800 \\ \hline Materials cost per unit (\$) & 2.4 & 2.4 & 2.4 & 2.4 & 2.4 & 2.4 & 2.4 & 2.4 \\ \hline Total purchases in month (\$) & 48,480 & 51,360 & 56,160 & 60,960 & 65,760 & 70,080 & 72,000 & 376,320 \\ \hline Payable in: & Jul & Aug & Sep & Oct & Nov & Dec & & \\ \hline \end{tabular} Calculation of direct labour cost: production units x$1.80 per unit Calculation of direct expenses: production units x$120 per unit Calculation of cash fixed overheads: 34,00012,000=$22,000 per month Depreciation is excluded as a non-cash item. Interest expense: $750,0008%6/12=$30,000