A company’s estimated pattern of costs and revenues for the first four months of 19_7 is as follows:

(1) One quarter of the materials are paid for in the month of production and the remainder two months later: deliveries received in November 19_6 were £78 600, and in December 19_6, £74 800.
(2) Customers are expected to pay one-third of their debts a month after the sale and the remainder after two months: sales expected for November 19_6 are £398 400, and for December 19_6, £402 600.
(3) Old factory equipment is to be sold in February 19_7 for £9 600.
Receipt of the money is expected in April 19_7. New equipment will be installed at a cost of £38 000. One half of the amount is payable in March 19_7 and the remainder in August 19_7.
(4) Two-thirds of the wages are payable in the months they fall due, and one-third a month later: wages for December 19_6 are estimated at £15 900.
(5) £50 000 of total monthly overheads are payable in the month they occur, and the remainder one month later: total overheads for December 19_6 are expected to be £265 200.
(6) The opening bank balance at 1 January 19_7 is expected to be an overdraft of £10 600.

Required

(a) Using the information above, prepare the firm’s cash budget for the period January - April, 19_7. (16 marks)

(b) Provide a statement to show those items in part

(a) which would appear in a budgeted balance sheet as at 30 April 19_7.

Transcribed Image Text:

Costs and Revenues: January - April 19_7 Month Sales (000) Materials Wages Overheads January 410.4 81.6 16.2 273.6 February 423.6 84.8 16.8 282.4 March 460.8 93.6 18.3 306.7 April 456.3 91.2 18.6 304.5