5. The Cash budget (use Excel worksheet "Cash budget"). (24 marks) THE CASE 9. Total fixed selling and administrative expenses are as follows: Bella Manufacturing Ltd. (BML) produces and distributes Rose 20-20, a specialised fertilizer for roses. The information below about BML's operations has been assembled to assist budget preparation. The company is preparing its master budget for the first quarter of 2020. The budget will detail each month's aclivity and the activity for the quarter in total. The master budget will be based on the following information: Advertising Depreciation Insurance Salaries Other $300 9,000 250 4,000 14.550 1. Selling price is $60 per unit in 2020 and will not change for the first two quarters of 2020. Actual and estimated sales are as follows: Actual 2020 November: 10,000 units December: 12,000 units 10. The company will purchase assets for use in the sales office at a cost of $300,000, which will be paid cash at the end of January 2021. The monthly depreciation expense on the additional capital assets will be $6,000, starting January Estimated 2021 January: 11.000 units February: 10,000 units March: 13,000 units April: 11.000 units May 11,000 units 11. The balance sheet as of December 31, 2019, Is as follows: Assets $80,00) 612,000 2. The company produces enough units each month to meet that month's sales plus a desired inventory level equal to 20% of next month's estimated sales. Finished Goods inventory at the end of December 2019 consisted of 2,200 units at a variable cost of $33 each. Cash Accounts receivable Inventory. Raw materials Finished goods Plant and equipment Less: accumulated depreciation Total assets $8,100 72,600 1,000,000 - 100.000 80,700 900,000 S1.672.700 3. The company purchases enough raw materials each month for the current month's production requirement and 25% of next month's production requirements. Each unit of product requires 5 kilograms of raw material at S0.60 per kilogram. There were 13,500 kilograms of raw materials in inventory at the end of December 2019. BML pays 40% of raw material purchases in the month of purchase and the remaining 60% in the following month. Llabilities and Equity 4. Each unit of finished product requires 1.25 labour-hours. The average wage rate is $16 per hour. Accounts payable 6% long-term notes payable Common shares Retained earnings Total liabilities and shareholders' equity S24,000 900,000 735,000 13.700 $1,672,700 5. Variable manufacturing overhead is 50% of the direct labour cost. 6. Fixed overhead costs (per month) are as follows: Additional information All cash payments except purchases of raw materials are made monthly as incurred. Factory supervisor's salary $75,000 Factory insurance 1,400 Factory rent 8,000 Depreciation of factory equipment 1,200 7. Credit sales for the month are 60% of the total sales. The company collects 50% of the credit sales during the first month following the month of sale and 50% during the second month. All borrowings occur at the beginning of each month, and all repayments occur at the end of the month. Borrowings and repayments may occur in any amount All interest on borrowed funds is paid at the end of each month at a rate of 0.5% per month % . . 8. Variable selling and administrative expenses consist of $4 for shipping and 10% of sales for commissions. Page 2 of 4 A minimum cash balance of $30,000 is required at the end of each month. Pace 3 of 4
