Reference no: EM132990879

Company is preparing budgets for the fourth quarter ending 31st December 2020.

i. Budgeted sales of the company for the next five months are:

October 2020 25,000 units

November 2020  55,000 units

December 2020 35,000 units

January 2021  30,000 units

February 2021 20,000 units

ii. The selling price is RM15 per unit. All sales are on account. The company collects 70% of credit sales in the month of the sale; 25% are collected in the month following sale; and the remaining 5% are uncollectible. The accounts receivable balance on September 30 was RM25, 000. All of this balance was collectible.

iii. The company desires to have inventory on hand at the end of each month equal to 15% of the following month's budgeted unit sales. On September 30th 2020, 3,000 units were on hand.

iv. 4 kg of material are required per unit of product. Management desires to have materials on hand at the end of each month equal to 15% of the following month's production needs. The beginning materials inventory was 12,000 kg. The material costs RM0.35 per kg.

v. 2/3 of a month's purchases are paid for in the month of purchase; the other 1/3 is paid for in the following month. No discounts are given for early payment. The accounts payable balance on September 30th was RM11,000.

vi. Each unit produced requires 0.05 hour of direct labor. Each hour of direct labor costs the company RM12. Management fully adjusts the workforce to the workload each month.

Required:

Problem a. Prepare sales budget and schedule of expected cash collection for quarter 4.

Problem b. Prepare production budget for quarter 4.

Problem c. Prepare direct material purchase budget, schedule of expected cash payment and direct labor budget for quarter 4.