Draw up a cash budget for N. Morris showing the balance at the end of each month,
Question:
Draw up a cash budget for N. Morris showing the balance at the end of each month, from the following information for the six months ended 31 December 20X2:
(a) Opening cash (including bank) balance £1,200.
(b) Production in units:
(c) Raw materials used in production cost £5 per unit. Of this 80 per cent is paid in the month of production and 20 per cent in the month after production.
(d) Direct labour costs of £8 per unit are payable in the month of production.
(e) Variable expenses are £2 per unit, payable one-half in the same month as production and one-half in the month following production.
( f ) Sales at £20 per unit:
20X2 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 260 200 320 290 400 300 350 400 390 400 Debtors to pay their accounts three months after that in which sales are made.
( g) Fixed expenses of £400 per month payable each month.
(h) Machinery costing £2,000 to be paid for in October 20X2.
(i ) Will receive a legacy £2,500 in December 20X2.
( j ) Drawings to be £300 per month.
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