When Jasmine contacted the bank and asked for an additional overdraft facility for the next few months, the bank manager explained that they would not consider it without firstly analysing a projected budget for the next three months, to ensure that Jasmines expansion plans are viable. As a first step, Jasmine approaches you to assist her in preparing operating budgets for the next three months October, November and December, and provides you with the information below concerning the proposed venture.

The jam will be produced in bulk by JJJ Ltd for another company to package and market. The current price of local fruit is fairly stable, with strawberries costing $4.30 per kg. A high-quality sugar extract, costing 95 cents per kg is also used to make the jams. The 1 kg jam recipe requires 0.65kg of strawberries and 0.35 kg of sugar. Jasmine is confident that the company can sell 800 kgs of Strawberry Jam in the first month of operations with sales increasing at a rate of 10% per month for the first six months when sales will then stabilise. The present market price is $15 per kg for Strawberry Jam. These prices are expected to remain constant for the next three months.

JJJ Ltd generally keeps enough raw materials on hand to cope with three weeks of next months production needs (to guard against supply problems). It is also company policy to keep finished goods inventory equal to one week of next months sales, so that customers can continue being supplied even if there are production breakdowns or other problems. [Note: Assume that one week equals of one month].

One kg of jam is expected to require six minutes (10% of an hour) of labour to manufacture, while variable overheads (electricity, maintenance, etc.) usually run at $0.45 per kg in Jasmines company. Sales commissions of 10% of sales revenues are paid to company sales representatives as an incentive. The company pays tax at an average rate of 35% of profits. Jasmines office staff have estimated the fixed manufacturing overheads expected to be associated with the jam venture, and these total $2,100 per month for October and November, increasing to $2,500 in December. Similarly, fixed selling and administration costs are expected to run at $1,800 per month. Jasmine will be able to source fruit etc. for a test run in the next few weeks and will consequently have some initial stocks of strawberries and sugar amounting 120 and 100 kgs respectively on hand to commence operations on 1 October. Further, the test runs of the jam will leave 60kg of Strawberry jam on hand ready to meet sales from that date. Jasmine pays her factory workers an average of $25 per hour.

Refer to the JJJ Ltd case study material above to provide the following information. Use Excel to prepare a master budget for JJJ Ltd for October, November and December. Include the following budgets:

a. Sales budget

b. Production budget

c. Direct materials purchases budget

d. Direct labour budget

e. Overhead budget

f. Selling and administrative expenses budget

g. Ending finished goods inventory budget

h. Ending direct materials budget

i. Budgeted cost of goods manufactured

j. Budgeted income statement