Reference no: EM132550911

Value Products Ltd manufactures a single product. It is preparing the monthly budgets for the next half-year period from July to December 2020. The following standard revenue and cost data is available:

Selling price: $12.00 per unit

Materials: 2 kg per unit at $2.40 per kg

Labour: $1.80 per unit

Direct expenses: $1.20 per unit

• The sales forecast in June and July 2020 are 10,000 units in each month. As a direct result of planned marketing expenditure of $95,000 in August 2020, sales are expected to be 11,000 units in August 2020 and to increase by 1,000 units in each month from September to December 2020. Sales after December 2020 are expected to remain at the December 2020 level.
• 25% of sales are paid for when they occur (cash sales) and 75% of sales are paid for in the next month after sale (credit sales). Inventories of finished goods at the end of each month are required to be 20% of the expected sales for the following month. Inventories of materials at the end of each month are required to be 50% of the materials required for the following month's production.
• Materials are paid for in the next month after purchase. Labour and direct expenses are paid for in the month in which they occur. Overheads for production, administration and distribution will be $34,000 per month, including depreciation of $12,000 per month. These overheads are payable in the month in which they occur. The company has a $750,000 bank loan at 8% per annum on which it pays interest twice per year, in March and September.
• The cash balance at the end of June 2020 is expected to be $50,000.

Question 1: Prepare the following budgets for Value Products Ltd on a month by month basis for the six-month period from July to December 2020:

(a) Sales Budget (units and revenues)

(b) Cash Collections Budget

(c) Production Budget (units)

(d) Materials Usage and Purchase Budget (units and costs)

(e) Cash Budget