Milbourn Manufacturing have created a new and exciting product. Their marketing team have conducted an extensive amount of research which has found that the introduction of the new product should result in an increase in monthly sales. As can be seen in Table 1, demand is expected to be high (starting at 220,000 unit sales), followed by an expected fall in sales before becoming steady (100,000 units). Table 1 Predicted monthly unit sales Jan Feb Mar Apr May Jun 220,000 160,000 125,000 120,000 100,000 100,000 Milbourn Manufacturers are to manufacture the producton licence for VGL Ltd who will distribute the product to the retailers. This assignment requires you to provide budgets for two entities which are the distributor, 'VGL Ltd' and the manufacturer of the goods, 'Milbourn Manufacturers'. VGL Ltd (The Distributor) i. A premium selling price of $510 is reliably expected to be achieved in the first two months due to the expected popularity and the uniqueness of the item. The selling price is expected to be reduced by 9% for each subsequent month up to and including May until the demand steadies as other manufacturers and distributors rush to duplicate the product and supply the retailers. From May, it is anticipated that the selling price will remain steady. ii. To allow for timely distribution, VGL Ltd requiresMilbourn Manufacturersto have the monthly demand manufactured and supplied to themone month in advance. (January's sales should be manufactured and delivered in December and so on). This will negate the need for Milbourn Manufacturers to have any ending inventory. iii. VGL Ltd has indicated that they will pay Milbourn Manufacturers $160 per unit. This will be paid within thirty days. That is, if the January units are delivered in December as expected,Milbourn Manufacturerswill be paid in full in January. iv. VGL Ltd has indicated that they expect to have $1,900,000 cash in their bank accounts at the end of December. v. VGL Ltdwill guarantee to supply the product to the retailers at a price that will allow them forty percent of the expected selling price as a selling profit. vi. VGL Ltd has a varying relationship with the retailers insofar as Credit sales collection goes. They estimate all sales will be on a credit basis with collections as follows. Current Month20% 30 Days 65% 60 days 15% vii. VGL Ltd has calculated that they will have cash expenses of $1,550,000 each month in addition to payments made to Milbourn Manufacturers. These expenses will commence in December. Milbourn Manufacturers Ltd (the manufacturer) The management of Milbourn Manufacturers Ltd have calculated and budgeted for the labour and materials usage requirements in Table 2. Table 2 Material Requirements Milbourn ManufacturersUnit Material Requirements Labour Hours 0.50 Material A Kgs 3 Material B Kgs 6 Material C Kgs 2 Management estimates for labour and material costs are displayed in Table 3. Management estimate that there will be $300,000 overhead costs to be factored into the budget. Table 3 Manufacturing Costs Milbourn Manufacturers Manufacturing Costs $ Labour Per Hour $36.00 Material A Per Kg $3.50 Material B Per Kg $4.50 Material C Per Kg $10.00 Overhead (Monthly) $300,000.00 Milbourn Manufacturersanticipates delivery of all necessary materials without any lag time. They can be supplied to them on the first of December when they will start production. Purchase of the necessary supplies for manufacture will be paid on the following credit terms:  Current Month 5%  30 Days 75%  60 days 20% All Labour costs and overheads must be paid in the current month. Milbourn