Periwinkle plc manufactures Product X using three different raw materials. The product details are as follows: i. Selling price per unit 250. Seventy-five percent of sales are collected in the first month and these customers receive a 0.5% discount. The remainder is collected in the following month. ii. Direct labour per unit 8 hrs iii. Labour rate 7.50 per hour iv. Materials requirement per unit: Material Required Price

A 3 kg $3.50 per kg B 2 kg $5.00 per kg C 4 kg $4.50 per kg v. The company is considering its budgets for next year and has made the following estimates of sales demand for Product X for July to October: June 350 units July 400 units August 300 units September 600 units October 450 units November 300 units vi. It is company policy to hold stocks (inventories) of finished goods at the end of each month equal to 50 per cent of the following months sales demand. vii. Raw material stocks (inventories) are expected to be 40% of the following months requirements. Material is paid for on a cash basis. viii. Labour is paid on an hourly rate based on attendance. In addition to the unit direct labour hours shown above. i$4.50 per kg v. The company is considering its budgets for next year and has made the following estimates of sales demand for Product X for July to October: June 350 units July 400 units August 300 units September 600 units October 450 units November 300 units vi. It is company policy to hold stocks (inventories) of finished goods at the end of each month equal to 50 per cent of the following months sales demand. vii. Raw material stocks (inventories) are expected to be 40% of the following months requirements. Material is paid for on a cash basis. viii. Labour is paid on an hourly rate based on attendance. In addition to the unit direct labour hours shown above.

Overheads for the period are expected to be: Variable Overheads Production $40 per unit Selling and Administration $35 per unit Fixed Overheads (monthly)

Production overheads $10 000 (including $3000 depreciation)

Selling and Administration $4000 (including $300 depreciation)

x. In September, Periwinkle plans to dispose of machinery. This is expected to realize $15 000. This machinery will be replaced in August with a new piece of

equipment at a cost of $45 000, to be paid in two equal instalments in August and September.

xi. The company will receive a tax refund of $6 000 Equipment.

xii. Periwinkles policy is to maintain a minimum cash balance of $10 000. The company can draw down (In multiples of $1 000) on a line of credit at a rate of $15%

per annum. This is repaid when there is surplus cash. Borrowing occurs on the first day of the month, repayments are made on the last day of the month. Requirements: a) Prepare the following budgets for the quarter from July to September inclusive: i. Sales budget ii. Schedule of cash collections iii. Production budget in units iv. Raw material purchases budget in kgs and value v. Labour requirements budget in hours and value. vi. Production overhead budget vii. Selling and Administration Budget viii. Cash budget