Andrew Automatons produces and sells toy robots. The following estimated information applies to the production and sale of toy robots for the 5 months ended 28 February Year 2

6. Andrew Automatons produces and sells toy robots. The following estimated
information applies to the production and sale of toy robots for the 5 months ended
28 February Year 2.
• The list selling price will be £80 per unit to traditional retailers such as
toy shops and large stores. From 1 October Year 1 Andrew began selling
to online retailers at discounts from the list price.
• Sales (in Units) from 1 October Year 1 to 31 January Year 2.
October November December January
Traditional
Retailers 4,000 5,000 5,000 1,000
Online
(30% discount) 3,000 3,000 3,000 –
Online
(50% discount) – – – 3,000
Factory Shop
(10% discount) 1,000 2,000 2,000 –
• Sales from 1 February Year 2 are expected to be 2,000 units per month in
total.
• Traditional retailers pay within 1 month, whilst online retailers pay
within 2 months. Factory shop sales are for cash.
• Bad debts will average 5% on all credit sales.
• Production Costs (per Unit):
Direct Materials 1·5 kg @ £14 per kg paid for 1 month after purchase
Labour 2 hours @ £9 per hour paid in month of production
Other Direct Costs £5 per labour hour paid in month of production
• Stocks of toy robots will be maintained at 70% of the next month’s sales
until 31 December. From January Year 2 onwards stocks will be reduced
to 20% of the next month’s sales.
• Stocks of direct materials will be maintained at 25% of the next month’s
production requirements at all times.
• There will be no work in progress.
• Fixed Overheads will be £20,000 per month.

a) Prepare the following budgets for the 4 months ending 31 January Year 2.
(i) Sales Budget (in units and sales value from the various sources)
(ii) Production Budget
(iii) Production Cost Budget
(iv) Material Purchases Budget
Additional information.
• Andrew has estimated that there will be an overdraft of £213,000 on
1 November Year 1.
• A loan of £100,000 along with interest at 10% is due for repayment in
January Year 2.
(b) Prepare the Cash Budget for 3 Months from 1 November Year 1.

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