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During March of 2021 Baby So Soft Ltd

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During March of 2021 Baby So Soft Ltd. formulated its 2022 sales and purchases forecast and budget for Diapers as follows:
Member should submit the assignment on moodle.

Diapers Sales & Purchases forecast and budget

Details	Sales Unit	Sales $	Purchase $
November 2021	5600	2800000	2000000
December 2021	3800	1900000	1500000
January	4800	2400000	3824000
February	5400	2700000	4080000
March	3200	1600000	2448000
April	2000	1000000	1900000
May	3200	1600000	2400000
June	2400	1200000	2700000
July	3000	1500000	1400000
August	2200	1100000	1600000
September	4000	2000000	1000000

 

Notes:

a) The company planned to sell one Diaper for $500 during 2022.

b) The closing stock level for both products at the end of each month is to be held at a level  equal to ten percent (10%) of the budgeted sales for the preceding month. Closing raw  material stock in units in store at the end of each month is to be equivalent to twenty  percent (20%) of the forecasted sales for the next month.

c) The warehouse and stores managers estimate a monthly spoilage of 35 Diapers and a monthly deterioration of 10 units of Cotton. They have suggested that a provision should  be made for these items’ damages and deterioration in store.

d) It takes (2) units of Cotton to produce one Diaper. The cost of one unit of cotton is $400.

e) At the end of December 2021, the bank balance was $50,000.

f) 70% of the company’s sales were for cash; and 30% was received two months after sale while 60% of purchases are for cash; 40% is paid for one month later.

g) Taxation for the first quarter of 2022 amounting to $1,200,000 was due in March 2022.

h) The company is to receive a government stimulus package of $4,500,000 paid in equal amounts in the first quarter of 2022.

i) In February of 2022 delinquent debtors repaid $3,500,000 of their debt to restore their reputation with Baby So soft Ltd.

j) Operating expenses amounted to $4,500,000 for 2022. Miscellaneous expenses amounting to $200,000 monthly was not included in the operating expenses budget.

k) In March 2022 the CEO’s company car was sold to his secretary for $1,500,000.

l) Rental income amounting to $4,800,000 per annum is budgeted for 2022.

m) A delivery van was bought for $2,000,000 and payment were made evenly in February and March of 2022.

n) A new plant for production was built in February for $1,500,000.

o) Salesmen are paid commission based on the amounts collected from sales each month.

The amount is 2% of sales collection each month.

Required:

For the period, January 2022 to March 2022 do the following:

a) The sales budget for both products for 2022. (4 marks)

b) The production budget for both products for 2022. (20 marks)

c) The direct raw materials usage budget for both products for 2022. (4 marks)

d) The direct raw materials purchases budget for both products for 2022. (30 marks)

e) A cash collection summary from sales showing cash and credit collections separately for the first quarter of 2022. (6 marks)

f) A payment summary for purchases showing cash purchases and credit purchases separately for the first quarter of 2022. (6 marks)

g) A cash budget for the first quarter of 2022. Clearly show amounts for cash sales, credit sales, cash purchases, credit purchases and totals. (30 marks