The budgeted balance sheet data of Kwan Tong Umbago Ltd is as follows: The estimates for the
Question:
The budgeted balance sheet data of Kwan Tong Umbago Ltd is as follows:
The estimates for the next four-month period are as follows:
The company intends to sell each unit for £219 and has estimated that it will have to pay £45 per unit for raw materials. One unit of raw material is needed for each unit of finished product.
All sales and purchases of raw materials are on credit. Debtors are allowed two months’ credit and suppliers of raw materials are paid after one month’s credit.
The wages, variable overheads and fixed overheads are paid in the month in which they are incurred.
Cash from a loan secured on the land and buildings of £120000 at an interest rate of 7.5 per cent is due to be received on 1 May. Machinery costing £112000 will be received in May and paid for in June.
The loan interest is payable half yearly from September onwards. An interim dividend to 31 March of £12500 will be paid in June.
Depreciation for the four months, including that on the new machinery, is:
The company uses the FIFO method of stock valuation. Ignore taxation.
Required:
(a) Calculate and present the raw materials budget and finished goods budget in terms of units, for each month from March to June inclusive.
(5 marks)
(b) Calculate the corresponding sales budgets, the production cost budgets and the budgeted closing debtors, creditors and stocks in terms of value.
(5 marks)
(c) Prepare and present a cash budget for each of the four months.
(6 marks)
(d) Prepare a master budget, i.e. a budgeted trading and profit statement, for the four months to 30 June, and budgeted balance sheet as at 30 June.
(10 marks)
(e) Advise the company about possible ways in which it can improve its cash management.
(9 marks)
ACCA Paper 8 Managerial Finance
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