The balance sheet of Pies and Cakes Ltd at 30 June 20X8 was expected to be as follows:

The plans for the six months to 31 December 20X8 can be summarised as:

(i) Production costs per unit will be:

(ii) Sales will be at a price of £20 per unit for the three months to 30 September and at £21 subsequently. The number of units sold will be:

All sales will be on credit, and debtors will pay their accounts one month after they bought the goods.

(iii) Production will be consistent at 450 units per month.

(iv) Purchases of direct materials – all on credit – will be:

Creditors for direct materials will be paid two months after purchase.

(v) Direct labour is paid in the same month as production occurs.

(vi) Variable indirect manufacturing expenses are paid in the month following that in which the units are produced.

(vii) Fixed indirect manufacturing expenses of £450 per month are paid each month and never in arrears.

(viii) A machine costing £2,500 will be bought and paid for in July. A motor vehicle costing £10,000 will be bought and paid for in September.

(ix) Debentures of £25,000 will be issued and the cash received in November. Interest will not be charged until 20X9.

(x) Provide for depreciation for the six months: Buildings £15,000; Motor vehicles £4,000; Office fixtures £220; Plant and machinery £5,000.

You are required to draw up as a minimum:

(a) Cash budget, showing figures each month.

(b) Debtors budget, showing figures each month.

(c) Creditors budget, showing figures each month.

(d) Raw materials budget, showing figures each month.

(e) Forecast operating statement for the six months.

(f ) Forecast balance sheet as at 31 December 20X8.

In addition, draw up any other budgets which show the workings behind the above budgets.

Transcribed Image Text:

Fixed assets Buildings Plant and machinery Motor vehicles Office fixtures Current assets Stock: Finished goods (570 units at £12 each) Raw materials Debtors (June 20X8 sales) Cash and bank balances Less: Current liabilities Balance Sheet 30 June 20X8 (£) Creditors for raw materials (May £300 + June £240) Creditors for indirect manufacturing expenses Financed by: Cost 300,000 50,000 30,000 2,500 382,500 540 1,050 Depreciation to date 120,000 30,000 14,000 1,100 165,100 6,840 1,500 9,500 35,500 53,340 (1,590) Net 180,000 20,000 16,000 1,400 217,400 51,750 269,150