1) Production Budget for December and January

Production Budget
For the Three Months ending, February 28 , 20XX
November December January February
Projected Sales 45,000 50,000 60,000 30,000
Add. Minimum Ending Inventory 6,000 7,000 4,000
Total Units Needed 51,000 57,000 64,000
Less: Beginning Inventory 5,500 6,000 7,000
Projected Production 45,500 51,000 57,000

*** Ending inventory is 10% of next month's budgeted sales+1000

*** BI=EI of last period

2) Direct Materials Purchases Budget for December

Direct Materials Budget

For the month ended December 31, 20XX
November December January
Projected Production in units 45,500 51,000 57,000
Material cost per unit $ 5 $ 5 $ 5
Material costs for units to be produced $ 227,500 $ 255,000 $ 285,000
Add: Material cost for miminum ending inventory $ 78,500 $ 87,500
Total Material costs needed $ 306,000 $ 342,500
Less: Material in Beginning inventory $ 70,250 $ 78,500
Total Material to Purchase $ 235,750 $ 264,000

3) Cash Budget for December

Cash Budget
For the month ending December 31, 20XX (in $)
December
Cash Balance, Beginning 15,000
Cash Receipts 1,986,600 **from cash collection below
Cash Available 2,001,600
Cash Payments
Direct Material 264,000 **from DM Purchases Budget
Direct Labour 408,000 **from Prod Budget
Variable Manufacturing Overhead 153,000 **from Prod Budget
Fixed Manufacturing Overhead 48,000 **only 30% is cash cost
Sales Commission 210,000 **from Sales Revenue in Dec
Fixed Selling and Admin 216,000 **only 60% is cash cost
Equipment Purchase Down Payment 400,000
Total Cash Payments 1,699,000
Cash Surplus in December 302,600 FINAL ANSWER
Excess Funds that can be used to retire debt 292,600
Cash Balance, Ending 10,000
**amortization is a non cash expense and excluded from the cash budget
Cash collection = (50,000x$42x10%) + (50,000x$42x90%x70%) + (45,000x$40x90%x28%)