Green Enterprises Ltd is preparing to set up a new business on the first of January 2021 to manufacture a single product. Below is the sales budget for the company for the first 6 months of 2021. Sales Budget

January February March April May June

Sales Unit 8 000 8 500 10 000 11 000 11 500 10 500

Sales Revenue 240 000 255 000 300 000 330 000 345 000 315 000

Additional Information; 1. The Cash collections patterns from sales is expected to be as follows:

(a) Cash Customers 30% of sales revenue will be for immediate cash

(b) Credit Customers 70% of sales revenue will be from credit customers. These debtors will pay their bills, 50% in the month after sales and the reminder in the second month after sales.

2. Stocks of finished goods are maintained 60% of the following months sales requirement, and the budgeted cost of a unit of finished goods is valued at N$ 20.

3. The product requires 4 kg of material X which cost N$ 1.5 per kg, it is expected that this price will increase with five cents from April.

4. One month`s credit is received from suppliers.

5. Stock of raw materials sufficient for 10% of the following month`s requirement in kgs are held at the end of each month.

6. One month`s credit is received from suppliers.

7. Expenses of the business will be settled as follows;

(a) Expected Costs Wages N$ 20 000 per month payable as incurred. Variable Overheads of N$ 5 per Unit is payable as incurred.

(b) There will be an Equipment to be purchased on 01 January 2021 it cost N$ 30 000, this equipment is expected to have a useful life of 5 years. To finance this purchase, a loan of N$ 24 000 will be secured from Development Bank of Namibia at 10% per annum. Interest is payable monthly, but capital loan repayment will not commence until July 2021.

REQUIRED: Marks 1.1. Prepare a production budget for the first four months of 2021 4

1.2. Prepare a material purchases budget for the first four months of 2021 (both in units and N$) 8

1.3. Prepare a budgeted Trading Profit and Loss Account for the four months ending April 2021 13

TOTAL MARKS 25