Singha Ltd produces and sells two products, X and Y, using the same type of materials and

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Question:

Singha Ltd produces and sells two products, X and Y, using the same type of materials and labor but in different quantities. Budgeted sales units for the next six months (July to December 2022) are as follows:

	July	August	September	October	November	December
Sales units of X	5,000	4,800	4,200	5,600	7,200	8,000
Sales units of Y	2,400	2,500	2,500	4,000	4,400	5,000

The standard selling prices and variable costs of production of each product are provided in the table below.

	Product X	Product Y
	£ per unit	£ per unit
Selling Price	£60	£100
Variable Costs of production
Material A (£2 per kg)	£6	£10
Material B (£3 per kg)	£12	£24
Direct labour (£10 per hour)	£15	£20
Variable production overhead (£4 per direct labour hour)	£6	£8

The management accountant of the company has provided the following additional information.

All sales are on account and the collection pattern are 35% collected in the month of sale; 25% collected in the month following the sale and 40% collected in the 2^nd month following the sale. No bad debts are anticipated and Singha Ltd provides a 1% discount to customers who pay in the month of sale.
Total sales revenue in May and June 2022 were £500,000 and £520,000 respectively.
Company policy is for closing inventory of all finished goods to be equal to 10% of the following month’s budgeted sales. On June 30^th, there were 500 units of X and 220 units of Y on hand.
Management wants both materials A and B on hand at the end of each month to be equal to 20% of the following month’s production requirements (usage). On June 30^th there were 5,000 kg of material A and 8,000 kg of material B on hand.
One-half (50%) of a month’s purchases of materials A and B are paid for in the month of purchase and the other half is paid in the following month.
Singha Ltd has a ‘no layoff’ policy and all employees are paid for 40 hours of work each week. However, all workers agreed to a wage rate of £10 per hour regardless of the hours worked (no overtime pay). For the months July to December 2022, the direct labour workforce will be paid for a minimum of 12,000 hours per month. Wages for labor are paid at the end of the month for their work.
Variable production overhead is charged to finished goods at the rate of £4 per direct labor hour worked.
Fixed manufacturing overhead is £36,250 per month, including depreciation charges of £1,250. Singha Ltd uses absorption costing principles and fixed manufacturing overhead is applied to units of the products on the basis of direct labor hours worked.
Variable administration & selling expenses are £0.50 per unit of X sold and £1 per unit of Y sold. Fixed administration & selling expenses are £10,000 per month.
All overheads (fixed and variable) are paid for in the month the costs are incurred.
The company will pay a cash dividend of £43,428 as well as purchase equipment to be used in the business for £180,000 in cash in July 2022.
Singha Ltd maintains a 20% open line of credit for £100,000 and maintains a minimum cash balance of £30,000 per month. All borrowing requirements are made on the first day of the month and repayments are made on the last day of the month.
The cash balance brought forward on the 1^st of July is £40,000.

REQUIRED

(a) Prepare Singha Ltd.’s Cash Budget for the months of July, August, and September 2022 and for the quarter ending 30^th of September 2022 as a whole.