Andrew Automatons produces and sells toy robots.
For the five months that concluded on February 28, Year 2, the following estimated data relates to the manufacture and sale of toy robots.
• The list selling price for each device will be £80 to traditional merchants like toy stores and big box stores. Beginning on October 1st, Andrew started offering reductions off the list price when selling to online shops.
• Sales (in Units) from October 1 to January 31 of the first year.
December and January follow October.
Typical Retailers Online: 4,000 5,000 5,000 1,000 (30% off) Online: 3,000 3,000 3,000 (50% off) 3,000 Factory Shop (discount of 10%) 1,000 2,000 2,000 –
From February 1 through Year 2, 2,000 units are anticipated to be sold overall.
• Online retailers pay in two months, compared to traditional retailers that pay in one. Sales in factory shops are for cash.
• On average, bad debts represent 5% of all credit sales.
• Costs of production (per unit):
Direct Resources 15 kg at £14 per kg, paid for after one month
2 hours of labor at £9 per hour paid in the production month
Unrelated Direct Costs $5 per hour of labor paid during the production month
• Until December 31, toy robot inventories will be kept at 70% of the previous month’s sales. Stocks will be lowered to 20% of the subsequent month’s sales beginning in January of Year 2.
• At all times, direct material inventories will be kept at a level equal to 25% of production needs for the following month.
• There won’t be any ongoing projects.
• Monthly Fixed Overheads will be £20,000.
a) Create the budgets listed below for the four months ending on January 31st, Year 2.
(i) Sales Budget, which includes sales value and units from various sources.
Budgets for production, production costs, and material purchases are included.
• Andrew predicts that on November 1st, Year 1, there will be a £213,000 overpublish.
• In January of Year 2, a loan for £100,000 plus interest at 10% is due.
(b) Create the cash budget for three months beginning on November 1 of the first year.
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