Reference no: EM132965527

Rogers Canada Inc. has a sales budget is given below for one of its Hip Replacement products manufactured by Roger Canada Inc.:

January 50,000 units
February 80,000 units
March 130,000 units
April  90,000 units
May  70,000 units
June  60,000 units

The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31, the finished goods inventory totaled only 8,000 units.

The following information has also been provided by Roger Canadian Inc.:

• All sales are made in cash for $10 per unit. For the month of January, direct material cash costs were $140,000, direct labour cash costs were $100,000, MOH cash costs were $120,000, cash selling and administration costs were $200,000, depreciation expense on factory equipment was $20,000, depreciation expense on the office building was $60,000. At the end of December, Roger Canadian Inc. had a cash balance of $40,000. That is the minimum balance required. Roger Inc. has a $200,000 line of credit. The interest expense is 12% on the outstanding amount borrowed, payable on July 31st and December 31st. Any amount borrowed is borrowed on the first of the month, and repayments are made on the last day of the month.

Required:

Problem 1: Prepare a cash budget for January.