You are required to: (a) Prepare the following budgets: (i) Production Budget, for the months of May to August 2020; (ii) Direct Materials Budget, for the months of May to August 2020; (iii) Direct Labour Budget, for the months of May to August 2020; (iv) Manufacturing Overhead Budget, for the months of May to August 2020; (v) Selling and administrative expense budget, for the months of May to August 2020; and (vi) Cash Budget, for the months May to July 2020. (b) Prepare a Budgeted Income Statement, for the months of May to July 2020.

QUESTION 1 (50 MARKS) Shirtex manufactures men's shirts (units). The shirts sell for Rs5 each. Sales and inventory expectations, for May to August 2020, are as follows: Ending inventory 30 April 30,000 units Desired ending inventory 23,000 units for May, 16,000 units for June; 9,000 units for July and 2,000 units for August Expected sales: 15,000 units for April 10,000 units for May, 25,000 units for June; 40,000 units for July and 30,000 units for August. It takes 0.25 metres of material at an estimated cost of Rs5.00 per metre; and 0.5 metres of synthetic thread at Re1.00 per metre to manufacture one shirt. Shirtex pays materials in advance of the month of usage in the preceding month). It takes five minutes to make and inspect one unit of men's shirts at an estimated cost of Rs20.00 per hour. Shirtex pays employees twice monthly in cash. Shirtex charges maintenance to sewing machines at a cost of Rs90 per 1,000 units. Power is charged at a fixed rate of Rs2,500 for the building. Indirect supplies are charged at RSO. 10 per unit. Factory rent is Rs8,000 per month. Depreciation is R$1,000 per month calculated on a straight-line basis. Shirtex pays administrative salaries of RS42,000 per annum. Office supplies total R$ 16,000 per annum. Depreciation on office equipment is Rs10,000 per annum. The straight-line method is used for depreciation. Travel costs amount to R$ 18,000 annually. Advertising and promotion total R$20,000 and marketing payments to sales people total Rs20,000 per annum. All of these expenses relate to the whole company, not just the men's shirts product. Shirtex has a bank balance at 30 April of Rs137,500. Shirtex receives payments from their customers in the month following the sale