A company manufactures and sells a single product. The following budget details are available:
$ per unit $ per unit
Selling price 55
Less:
Materials 15
Labour 10 (25)
Contribution 30
Additional information:
(1) Budgeted sales units are as follows:
Jan Feb Mar Apr May June July
300 400 400 450 500 700 800
(2) Opening inventory (units) at the start of January will be 50 units. Closing inventory for each month is estimated at 15% of the sales volume for the next month.
(3) Production occurs in the same month of sales.
(4) Materials and labour costs are paid for in the same month of production.
(5) All sales are on credit. Sales revenue is received 70% in the month of sale and 30% during the following month.
(6) Fixed overheads are paid for in the month in which they are incurred. There are expected to be as follows: January $5,000, February $ 15,000 and thereafter overheads will increase by 5% each month on the previous figure.
(7) Machinery costing $1,200,000 is due to be installed in February. One third of this cost will be paid in each of the months April, May and June.
(8) Taxation of $150,000 will be paid in April.
(10) A $3,500,000 loan from the Nova Scotia Bank will be received in May.
(11) The opening debtor balance in January is $100,000.
(12) The opening bank balance in January will be $ 200,000 overdrawn.
Required: Prepare the cash budget for the six months January to June
