You have recently been promoted as Management Accountant of Exquisite Bedding Limited, a small company that manufactures a specialized bed for the elderly which is sold to the public and its wholly-owned subsidiary company, Ultimate Care Ltd a retain department store. The company uses a rolling budgetary control system and is in the process of preparing the budget for the four months period from September to December 2021.

During the preliminary review, you established that the company intends to sell each bed produced for $219 to Ultimate Care in addition to individual customers on the same credit terms.

Exquisite Bedding Ltd secured a cash loan of 120,000 from Broughton Bank that was secured on the land and building at an interest rate of 7.5% per annum. The loan is due to be received in November 2021. The repayment of the loan will begin on March 1, 2022, however monthly interest payments will begin in December 2021. Also, machinery costing $112,000 will be received in November and paid for in December. You have been provided with the following budgeted balance sheet information as at September 1, 2021 as well as estimates and other operating data:

Exquisite Bedding Limited

Budgeted Balance Sheet as at September 1, 2021

ASSETS Cost Depreciation to

Date Net book value

Non-current Asset $ $ $ Land and Building 500,000 0 500,000 Machinery and equipment 124000 84500 39,500 Motor Vehicles 42000 16400 25,600 666,000 100,900 565,100

Current assets

Closing stock:

Raw materials 4320

Finished goods 10450 14770 Receivables 9040 cash at bank 6790 30600 Total Asset 595,700

Equity

500,000 $1 ordinary shares 500000 Share premium 50960 Retained earnings 40840 591800

Current liabilities

Accounts payable 3900 Total Equity and liability 595700

Other information:

1. Estimates sales in units for September will be 80 units. Sales units will increase by 10 units each month.

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2. All sales are on account. The customer is allowed to pay 50% in the month of sale and

the remainder the month following sale.

3. Sales on account for August was $18,080.

4. Stock valuation was done using FIFO method and closing stock of finished goods on August 31 will be 100 units. The companys policy is to have the next months sales in units in stock of finished goods at the end of each month

5. It is the companys policy to maintain 50% of the materials required for the next months production. The opening stock of raw material is 175 kgs

6. The company estimated that it will have to pay $10 per unit for raw materials. 5 kgs of raw material is required to produce one bed.

7. All purchases of raw material are on account. 60% of raw material purchases are paid for in the month of purchase and 40% the month following purchase. Accounts payable for August 31, 2021 was 3900.

8. Variable overheads are charged at a rate of $3 per labour hour. Fixed overheads were estimated at $1,200 per month.

9. The company sublets a section of the factory and the monthly rent of $3,000 is received in the month incurred.

10. Each bed takes 12 labour hours at a rate of $5 per labour hour.

11. An interim dividend of $20,000 for 30th September 2021 will be paid in November 2021. 12. Depreciation for the four months, including the new machinery, was calculated to be: Machinery and equipment $15,733

Motor Vehicle $3,500

14. Other monthly expenses are as follows: transportation cost $1,250 and miscellaneous expenses of $750

15. The companys policy is to maintain a minimum cash balance of $10,000 each month.

prepare Cash disbursement budget