Question

a. Cash collection for January

 Particulars Cash collected Cash Sales (RM 83,000 * 30%) RM 24,900 Credit Sales* (RM 70,000 * 70%) RM 49,000 Total RM 73,900

*Credit sales for December will be collected in January = RM 70,000 * 70% = RM 49,000

b. Production budget for January

 Particulars Units Unit Sales (RM 83,000 / RM 10) 8,300 Plus: Desired Ending Inventory 2,300* Total Needed 10,600 Less: Beginning Inventory 2,075** Number of Units to Produce 8,525

*Calculation of ending inventory

Sales in February = RM 92,000

Selling price per unit = RM 10

Number of units to be sold = RM 92,000 / RM 10 = 9,200

Ending inventory = 25% of Sales in next month

Ending inventory in January = 9,200 * 25% = 2,300

**Calculation of beginning inventory

Ending inventory of December = Opening inventory of January

Ending inventory of December = 25% of Sales in January

Ending inventory of December = 8,300 * 25% = 2,075

c. Direct materials purchase budget

 Units to be produced (from Production Budget) 8,525 Quantity (pounds) of DM needed per unit 2 Quantity needed for production (8,525 * 2) 17,050 Plus: Desired ending inventory of DM* (18,600 * 10%) 1,860 Total quantity (pounds) needed 18,910 Less: Beginning inventory of DM** 1,705 Quantity (pounds) to purchase 17,205 Cost per pound RM 2 Total Cost of DM purchases (17,205 * RM 2) RM 34,410

*Calculation of desired ending inventory of DM

Desired ending inventory of DM = 10% of production needs of February (as shown below)

 Unit Sales 9,200 Plus: Desired Ending Inventory (see note) 2,400 Total Needed 11,600 Less: Beginning Inventory 2,300 Number of Units to Produce 9,300 Quantity of DM needed per unit 2 Quantity needed for production (9,300 * 2) 18,600

Note: Since sales of March are not given, I have assumed it to be RM 96,000. Hence the number of units sold will be 9,600 (RM 96,000 / RM 10). Accordingly desired ending inventory for February will be 2,400 (9,600 * 25%).

**Beginning inventory of DM

Beginning inventory of DM for January= Ending inventory of DM of December

Ending inventory of DM of December = 10% of production needs of January

= 17,050 * 10% = 1,705

d. Schedule of cash disbursements for January

 December Purchases (Accounts Payable) RM 42,400 January Purchases (RM 34,410 * 10%) RM 3,441 Cost of Labor (8,525 units * 0.02 hour * RM 10) RM 1,705 Variable Manufacturing Overhead (8,525 units * RM 1.20) RM 10,230 Fixed Manufacturing OH less Depreciation (RM 8,000 - RM 600 - RM 500) RM 6,900 Variable Operating Expenses (8,300 units sold * RM 1) RM 8,300 Fixed Operating Expenses (given) RM 2,000 Purchase of Machinery (given) RM 6,200 Total Cash Disbursements RM 81,176

Note: As per HOMEWORKLIB POLICY in case of multiple sub-questions, only the first four need to be answered.

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