QUESTION 2 (34 MARKS/ 62 MINTUES) HIJ Ltd was established six months ago. It only manufactures Product R. The following is its budget for the next five months. 1) Budget sales of Product R: 2) Collection of sales proceed: All sales are expected to be carried out on credit. According to company records, its credit customers are expected to pay 70% in the month of sale and 28% in the next month. Those customers who pay in the sales month are given 2% cash discount from the invoice price. The remaining trade receivables are expected to be uncollectible. 3) Finished goods inventories: Inventories of finished goods are expected to be 5,000 units at 1 January. The business's policy is that, in the future, the inventories at the end of each month should equal 20% of the following month's planned sales requirements. 4) Raw materials inventories: Inventories of raw materials are expected to be 4,000kg on 1 January. The business's policy is that, in the future, the inventories at the end of each month should equal 50% of the following month's planned production requirements. Each Product R requires 0.5kg of the raw material, which costs RM3/kg. Raw materials purchases are paid in the month after purchase. 5) Labor and overheads: The direct labor cost of each Product R is RM3.80. The variable overhead element of each Product R is RM1.50. Fixed overheads, including depreciation of RM4,500, total RM20,700 a month. All labor and overheads are paid during the month in which they arise. 6) Cash balance: On January 1, the company's cash balance was RM43,000. The minimum cash balance is RM 40,000 . If there is a shortage, a loan is obtained at an annual interest rate of 8% on the first day of the period. The interest expense must be paid at the end of the next month. 7) Cash dividend received: In March, the company will receive a cash dividend of RM56,000 from its stock market investments. Page 3 of 6 8) Income tax: Corporate income taxes are approximately RM4,500 and will be paid in February. Required: Prepare the following budgets: a) Finished goods inventories budget (expressed in units of Product R) for each of the three months January, February, and March. (6 marks) b) Raw materials inventories budget (expressed in kilograms of the raw material) for the two months January and February. (4 marks) c) Cash budget for February and March for the 20X3. (19 marks) d) Which budget is the first one that must be completed in the master budgeting process and why