. Litein Limited produces a single product, whose unit budget details are shown below:

Shs. Shs.

Selling price 30

Less costs:

Direct material 9

Direct labor 4

Direct production expenses 6

Variable selling expenses 4

(23)

7

Additional information:

1. Units to be sold are expected to be as follows:

Nov Dec Jan Feb March

1,000 800 400 600 900

2. Credit sales will be 60 per cent of total sales. Accounts receivable will be collected in the month following sale for which a cash discount of 2 per cent will be given.
3. Stock levels will be arranged so that the production in one month will meet the next months sales demand.
4. The purchases of direct materials in one month will just meet the next months production requirements.
5. Suppliers of direct materials will be paid in the month following purchase.
6. Labor costs will be paid in the month in which they are incurred. All other expenses will be paid in the month following that in which they are incurred.
7. Fixed expenses are expected to be Shs.2,000 per month and include Shs.180 for depreciation.
8. The bank balance at 1 December, 2020 is expected to be a credit of Shs.3,900.

Required:

Prepare a cash budget for Litein Limited for the three-month period ending on 31^st March, 2021 showing the balance of cash at the end of every period. (10Marks).