Budgeting

Dortex Lid is a small importer of photocopiers. In recent months it has been selling 50 machines a month at a price of $2,000 each. These machines cost $1,600 each. A new model has just been launched and this is expected to offer greatly enhanced performance. Its selling price and cost will be the same as for the old model. From the beginning of January Year 6, sales are expected to increase at a rate of 20 machines each month until the end of June Year 6, when sales will amount to 170 units per month. They are expected to continue at that level thereafter. Operating costs including depreciation of $2,000 a month are forecast as follows: Jan Feb Mar Mar May June Operating costs (8000) 6 8 10 12 12 12 Dortex expects to receive no credit for operating costs. Additional shelving for storage will be bought, installed and paid for in April, costing f12,000. Corporation tax of 125,000 is due at the end of March. Dortex expects that trade receivables will take two months to pay. To give their customers a good level of service, Dortex plans to hold enough inventories at the end of each period to fulfil anticipated demand from customers in the following month. The photocopier manufacturer, however, grants one month's credit to Dortex. (Click here to view the Dortex Ltd's statement of financial position, as at the end of Year 5.) Required: Prepare a cash budget for Dortex Lid showing the cash balance or required overdraft for the six months ending 30 June Year 6. Dortex Ltd The cash budget for the six months to 30 June is: Jan Feb Mar Apr May June EOOO EOOO EOOO Receipts Credit sales Payments Trade payables Operating expenses Shelving TaxationCash flow Opening balance Closing balanceStatement of financial position at 31 December Year 5 EOOO ASSETS 80 Non - current assets Current assets Inventories 112 Trade receivables 200 Cash 312 Total assets 392 EQUITY AND LIABILITIES Equity Share capital - 25p ordinary shares 10 Retained earnings 177 187 Current liabilities Trade payables 112 TrustismCurrent liabilities Trade payables 112 Taxation 25 Overdraft 68 205 Total equity and liabilities 392