A new company,is being established to manufacture and sell an electronic tracking device: the Trackit. The owners are excited about the future profits that the business will generate. They have forecast that sales will grow to 2,600 Trackits per month within five months and will be at that level for the remainder of the first year.    The owners will invest a total of $250,000 in cash on the first day of operations (that is the first day of July). They will also transfer non-current assets into the company.   Extracts from the company’s business plan are shown below.     Sales The forecast sales for the first five months are :       Month Trackits (units) July                              1,000  August                           1,500  September                       2,000  October                          2,400  November                        2,600   The selling price has been set at $140per Trackit. Sales receipts Sales will be mainly through large retail outlets. The pattern for the receipt of payment is expected to be as follows: Time of payment                % of sales value Immediately                     15* One month later                  25 Two months later                 40 Three months later                15   The balance represents anticipated bad debts. *A 4% discount will be given for immediate payment Production The budget production volumes in units are: July    August     September    October 1,450   1,650       2,120        2,460   Variable production cost The budgeted variable production cost is $90 per unit, comprising: $ Direct materials                          60 Direct labour                            10 Variable production overheads             20 Total variable cost                        90 Direct materials:Payment for purchases will be made in the month following receipt of materials. There will be no opening inventory of materials in July. It will be company policy to hold inventory at the end of each month equal to 20% of the following month’s production requirements.    Direct labour will be paid in the month in which the production occurs.Variable production overheads: 65% will be paid in the month in which production occurs and the remainder will be paid one month later.   Fixed overhead costs   Fixed overheads are estimated at $840,000 per annum and are expected to be incurred in equal amounts each month. 60% of the fixed overhead costs will be paid in the month in which they are incurred and 15% in the following month. The balance represents depreciation of noncurrent assets.   Required: Prepare a cash receipts budget schedule for each of the first three months (July –September), including the total receipts per month. Prepare a material purchases budget schedule for each of the first three months (July –September), including the total purchases per month.  c) Prepare a cash budget for the month of July. Include the owners’ cash contributions

A new company,is being established to manufacture and sell an electronic tracking device: the Trackit. The owners are excited about the future profits that the business will generate. They have forecast that sales will grow to 2,600 Trackits per month within five months and will be at that level for the remainder of the first year.

 The owners will invest a total of $250,000 in cash on the first day of operations (that is the first day of July). They will also transfer non-current assets into the company.

Extracts from the company’s business plan are shown below.

Sales

The forecast sales for the first five months are

:       Month Trackits (units)

July                              1,000 

August                           1,500 

September                       2,000 

October                          2,400 

November                        2,600

The selling price has been set at $140per Trackit.

Sales receipts

Sales will be mainly through large retail outlets. The pattern for the receipt of payment is expected to be as follows:

Time of payment                % of sales value

Immediately                     15*

One month later                  25

Two months later                 40

Three months later                15

The balance represents anticipated bad debts.

*A 4% discount will be given for immediate payment

Production

The budget production volumes in units are:

July    August     September    October

1,450   1,650       2,120        2,460

Variable production cost

The budgeted variable production cost is $90 per unit, comprising:

$

Direct materials                          60

Direct labour                            10

Variable production overheads             20

Total variable cost                        90

Direct materials:Payment for purchases will be made in the month following receipt of materials. There will be no opening inventory of materials in July. It will be company policy to hold inventory at the end of each month equal to 20% of the following month’s production requirements.

 Direct labour will be paid in the month in which the production occurs.Variable production overheads: 65% will be paid in the month in which production occurs and the remainder will be paid one month later.

Fixed overhead costs  

Fixed overheads are estimated at $840,000 per annum and are expected to be incurred in equal amounts each month. 60% of the fixed overhead costs will be paid in the month in which they are incurred and 15% in the following month. The balance represents depreciation of noncurrent assets.

Required:

1. Prepare a cash receipts budget schedule for each of the first three months (July –September), including the total receipts per month.
2. Prepare a material purchases budget schedule for each of the first three months (July –September), including the total purchases per month. 
3. c) Prepare a cash budget for the month of July. Include the owners’ cash contributions