John Rees has the following information for the six months 1 July to 31 December. (a) Opening
Question:
John Rees has the following information for the six months 1 July to 31 December.
(a) Opening cash balance 1 July £8,600
(b) Sales at £25 per unit:
Trade receivables will be paid two months after the customers have bought the goods.
(c) Production in units:
(d) Raw materials costing £10 per unit are delivered in the month of production and will be paid for three months after the goods are used in production.
(e) Direct labour of £6 per unit will be payable in the same month as production.
(f) Other variable production expenses will be £6 per unit. Two-thirds of this cost will be paid for in the same month as production and one-third in the month following production.
(g) Other expenses of £200 per month will be paid one month in arrears. These expenses have been at this rate for the past two years.
(h) A machine will be bought and paid for in September for £8,000.
(i) John Rees plans to borrow £4,500 from a relative in December. This will be banked immediately.
Required:
Prepare John Rees’s cash budget from 1 July to 31 December.
Step by Step Answer:
