( www uppupp i wpur desks at a price of K15 per kg of material. He is hopeful that the Ministry will ask for more desks in the near future' As he is a new customer the supplier is unwilling to give him longer credit and he will be required to pay for the materials when they are delivered which is the same month production takes place. His buying pattern is to buy as much materials as is needed for production in that month. He will not keep inventory of materials at 30% of the following month's production requirement, although in June 2020, he intends to keep it at 20% of that month's production requirement. This is to allow for production of any desks that might be damaged during transportation. On average he uses 10 kg of material to make a desk, and this is unlikely to change over the period Ricky will need machinery to allow him to make the desk. He has seen a new machine at a recent trade show at a cost of K80,000 that he had opted to buy. He will need to pay for this machine when it is delivered in January 2020. The business plan shows that the monthly overheads of the new business will be K20,000 payable in the same month they are incurred. In additional, delivery costs have been estimated at 9% of revenue payable in the same month revenue is earned. 7 8. To make sure he and his family have enough to live on, Ricky will pay himself a monthly salary of K9,000 in January 2020, increasing by 10% in February, March and April. He will then maintain the April level for the rest of the period. He has K50,000 saved up that he will pay into the business bank account in January 2020 to get the business started. Ricky has heard that you are studying for your Bachelors Degree in Accounting and has asked for some help in budgeting for the business. Required: (a) Prepare the following functional budgets for the six months to 30 June 2020. (0) Sales budget in units and value (2 marks) (1) Production budget in units (4 marks) (ii) Materials purchases budget in kg and value (6 marks) (iv) Cash budget (8 (b) Management accounting is normally said to help in planning and deci with the help of the budgets prepared above, explain three (3) decisions could consider for his business to do well. (5 marks) 0 ' ( www uppupp i wpur desks at a price of K15 per kg of material. He is hopeful that the Ministry will ask for more desks in the near future' As he is a new customer the supplier is unwilling to give him longer credit and he will be required to pay for the materials when they are delivered which is the same month production takes place. His buying pattern is to buy as much materials as is needed for production in that month. He will not keep inventory of materials at 30% of the following month's production requirement, although in June 2020, he intends to keep it at 20% of that month's production requirement. This is to allow for production of any desks that might be damaged during transportation. On average he uses 10 kg of material to make a desk, and this is unlikely to change over the period Ricky will need machinery to allow him to make the desk. He has seen a new machine at a recent trade show at a cost of K80,000 that he had opted to buy. He will need to pay for this machine when it is delivered in January 2020. The business plan shows that the monthly overheads of the new business will be K20,000 payable in the same month they are incurred. In additional, delivery costs have been estimated at 9% of revenue payable in the same month revenue is earned. 7 8. To make sure he and his family have enough to live on, Ricky will pay himself a monthly salary of K9,000 in January 2020, increasing by 10% in February, March and April. He will then maintain the April level for the rest of the period. He has K50,000 saved up that he will pay into the business bank account in January 2020 to get the business started. Ricky has heard that you are studying for your Bachelors Degree in Accounting and has asked for some help in budgeting for the business. Required: (a) Prepare the following functional budgets for the six months to 30 June 2020. (0) Sales budget in units and value (2 marks) (1) Production budget in units (4 marks) (ii) Materials purchases budget in kg and value (6 marks) (iv) Cash budget (8 (b) Management accounting is normally said to help in planning and deci with the help of the budgets prepared above, explain three (3) decisions could consider for his business to do well. (5 marks) 0