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Problem 4 - Master Budgeting (20 marks) JDi is a leading drone manufacturer in China. Due to the high demand for its recreational and commercial drones, marketing department has just presented its newest projection to the top management. Below are the projected sales and production for the month of May through September (assuming production equals to sales): Additional information is as follows: (1) JDi has the policy of making the material purchase payment in the month following the purchase. Direct materials purchase information is given below. (2) Each drone needs 20 direct labour hours and each direct labour hour costs \$10. Labour costs are paid in the month incurred. (3) Manufacturing overhead consists of variable manufacturing overhead, which is incurred at a rate of $2 per direct labour hour. Ji also incurs fixed manufacturing overhead costs of $75,000 per month (including $23,500 for depreciation of manufacturing equipment) and other nonmanufacturing costs of $34,000 per month (including $8,700 depreciation for office equipment). These costs are all paid in the month incurred. (4) The average selling price per drone is $700. From past experience, JDi's accountant predicts that 20% of invoices are paid in the month of sale, 50% are paid in the month following the sale, and another 25% are paid two months following the sale. The remaining 5% will be uncollectible. There are no cash sales. (5) The beginning cash balance for July 1 is $20,000. On October 1 last year, JDi experienced a cash shortage and borrowed $250,000 at 12% interest per year from the bank with interest paid in the month incurred. The company would like to pay back the borrowings as soon as it can. No partial payback is allowed. Any payment is considered to be made at the end of the month. (6) In August, JDi purchased a new piece of equipment for $157,500 with cash. The depreciation of this new piece of equipment has been included in the fixed manufacturing cost mentioned above. Required: i. Prepare a schedule of expected cash collections for the months of July, August, and Seplember. (4.5 marks) ii. Prepare a cast budget by month for July, August and September. (15.5 marks) 5

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