SBS Company have received a contract to supply its product to a Health Care Service Hospital....

Transcribed Image Text:

SBS Company have received a contract to supply its product to a Health Care Service Hospital. The sales involve supplying 1,250 units every quarter, the sales price is RM 85 per unit. The Client intends to pay 80% of the sales within the quarter and the remaining 20% in the next following quarter, and this schedule is not negotiable. Company has no beginning finished product. At the end of the year the desired finished product is 50 units. At the end of every quarter the desired ending inventory is 10% of the next quarter unit sales. Production for each quarter will be based on the unit sales for the quarter. The production will require 5kg of raw materials per unit. The cost of the raw materials is RM 5 per kg. The company has 60kg of beginning raw materials at a cost of RM 5 per kg. The desired ending raw materials is 100kg. SBS will pay 90% of the purchase every quarter. However, this arrangement of payment is negotiable. Production will require 5 direct labour hours per unit of product. The direct labour cost is RM 6 per hour. All wages for the direct labour will be paid within the quarter. The company will incur variable overhead expenses based on direct labour hours. The overhead rate is RM 3 per direct labour hour. The Company will be renting a machine at RM 12,000 per annum. A supervisor will be employed to oversee the production and will be paid RM 15,000 per annum. The rent for the machine and wages of the supervisor will be paid monthly. The monthly administration expenses are as follows:- Salaries Insurance Depreciation Rent of Admin Building 2,000 100 41.67 1,000 The company has a beginning cash balance of RM 5,000. Long term Borrowing can be arranged and will be charged with an 8% interest rate, and the company has to pay 20% of the amount borrowed within the year. Any short-term borrowing will be at 6% interest rate and has to be paid within the year. Required: Prepare a Master Budget for the company until the cash budget. The cash balance at the end of each quarter must show at least RM5,000. SBS Company have received a contract to supply its product to a Health Care Service Hospital. The sales involve supplying 1,250 units every quarter, the sales price is RM 85 per unit. The Client intends to pay 80% of the sales within the quarter and the remaining 20% in the next following quarter, and this schedule is not negotiable. Company has no beginning finished product. At the end of the year the desired finished product is 50 units. At the end of every quarter the desired ending inventory is 10% of the next quarter unit sales. Production for each quarter will be based on the unit sales for the quarter. The production will require 5kg of raw materials per unit. The cost of the raw materials is RM 5 per kg. The company has 60kg of beginning raw materials at a cost of RM 5 per kg. The desired ending raw materials is 100kg. SBS will pay 90% of the purchase every quarter. However, this arrangement of payment is negotiable. Production will require 5 direct labour hours per unit of product. The direct labour cost is RM 6 per hour. All wages for the direct labour will be paid within the quarter. The company will incur variable overhead expenses based on direct labour hours. The overhead rate is RM 3 per direct labour hour. The Company will be renting a machine at RM 12,000 per annum. A supervisor will be employed to oversee the production and will be paid RM 15,000 per annum. The rent for the machine and wages of the supervisor will be paid monthly. The monthly administration expenses are as follows:- Salaries Insurance Depreciation Rent of Admin Building 2,000 100 41.67 1,000 The company has a beginning cash balance of RM 5,000. Long term Borrowing can be arranged and will be charged with an 8% interest rate, and the company has to pay 20% of the amount borrowed within the year. Any short-term borrowing will be at 6% interest rate and has to be paid within the year. Required: Prepare a Master Budget for the company until the cash budget. The cash balance at the end of each quarter must show at least RM5,000.