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You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a

You are contemplating leaving your full-time employment to concentrate your ability on the marketing of a new low-energy portable heater. You have spoken to a group of manufacturers of similar product, and you have produced the following data based upon the production of 1200 heaters in the six months to December 31, 2021.

                                                                                    R                                 R

Unit selling price                                                                                            160

Less: Direct materials                                                 50

           Direct labour                                                    30

Fixed Overheads:

Admin                                                                         4.00

Rent                                                                            7.50

Rates                                                                           2.50

Depreciation                                                               1.00                             95

Mark up                                                                                                           65


Your initial plan is to produce 200 units per month and to start selling in August 2021. The forecast of sales you have calculated is:

                        August             September       October           November       December

Unit                 50                    80                    120                  180                  200

All sales will be made on 30 days credit.

Machinery will cost you R24, 000. This you propose financing on hire purchase terms; deposit payable July 1, 2021, R2,400; followed by 24 monthly instalments of R1,000 each. Raw materials suppliers will deliver an equal amount of parts at the beginning of each month. They will allow you 60 days credit.

Wages and administrative expenses will be paid in the month in which they are incurred. Rent and rates of the premises will be paid quarterly in advance commencing on July1, 2021.

REQUIRED:
Prepare cash budget for the 6 months to December 31, 2021 for presentation to your bank manager who you hope will be prepared to give you an overdraft facility to supplement the R20,000 you intend introducing into your business
(a) Calculate the closing balance for December.

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