From the following data, prepare a cash budget for the quarter October–December. Draft a note from the management accountant and financial controller to accompany this statement.

Rs

(a) Sales: from the months of August August 20,000 September 25,000 October 30,000 November 30,000 December 32,000

a. All the sales are on credit; half the dues are collected in the month of sale, on which a cash discount of 20% is allowed, and the other half is realized in the next month.

b. Materials are purchased for cash on which a rebate of 5% is offered by the supplier. If the company buys on credit, payment can be deferred by 1 month foregoing the rebate. The purchase budget for the next quarter is as follows: October—Rs 12,500; November—Rs 15,000; December—

Rs 18,000.

c. The direct labour budget is as follows:

Department A

(Rs)

Department B

(Rs)

October 3,000 4,000 November 3,000 4,000 December 3,000 3,800

d. The manufacturing overhead budget is as follows:

Department A

(Rs)

Department B

(Rs)

General factory

(Rs)

October 2,400 1,550 800 November 2,400 1,550 800 December 2,500 1,650 900 The aforementioned estimates include the quarter’s provision for depreciation amounting to Rs 900 for department A and Rs 750 for department B.

e. The general overheads for the quarter is Rs 3,500 (out of which Rs 200 is for depreciation reserve and Rs 300 is for bad debts reserve).

f. An old machine is to be replaced with an additional outlay of Rs 7,000 in the month of December.

g. The cash balance on 1 October may be taken as Rs 15,000.