a) You are provided with the following information relating to Dolby Sound Ltd. The

accountant is currently preparing the budget for the next three months ending 31

December 2020.

Month Sales (Rs) Materials(Rs) Wages(Rs) Overheads(Rs)

August 14,000 9,600 3,000 1,700

September 15,000 9,000 3,000 1,900

October 16,000 9,200 3,200 2,000

November 17,000 10,000 3,600 2,200

December 18,000 10,400 4,000 2,300

1. The credit terms are as follows:

- 10% sales are cash,

- 50% of the credit sales are collected next month

- and the balance in the following month,

2. For the following items of expenditure, the credit terms are as follows:

Materials: 2 months.

Wages: 1 month.

Overheads: 1 month.

3. Cash and bank balance on 1st October 2020 is expected to be Rs 6,000

4. Other relevant information:

Plant and Machinery would be installed in August 2020 at a cost of Rs

96,000. The monthly installments of Rs 2,000 is payable as from

October onwards,

A dividend of 5% on the ordinary share capital of Rs 200,000 would

be paid on 1st December 2020.

An advance receipt of Rs 9,000 is expected in December 2020 and

will relate to the sale of vehicles.

Dividends from investments amounting to Rs 1,000 are to be received

in November 2020.

An advance payment of income tax is to be paid in December 2020 of

Rs 2,000.

REQUIRED: Prepare cash budget for 3 months ending 31st December 2020.

b) Zero-Base Budgeting is a technique of planning and decision-making whereby

each item of expenditure is justified on an annual basis.

REQUIRED: Explain why Zero-Based Budgeting might be a useful tool to employ to ensure

that budgetary requirements are kept up to date.