* Chapter Exercise 10.5

a) Obangaber Winery Ltd (OWL) is making plans for the second half of the year but it has been operating without a professional accountant. The company contacted you as a finance specialist on short term basis to prepare a forecasted cash budget for the period running from January to June 2022 and has provided you with the following information. The company sold and delivered a total of 400 and 560 cartons of wine in the month of November and December respectively and therefore expects the demand and deliveries for the coming periods to be as indicated below.

Period Cartons

January 500

Feb 550

March 480

April 400

May 500

June 600

July 750

Cartons of wine to be delivered

NB: months are with respect to the cartons

Additional Information;

i) Each Carton has been selling for $1800 but this changed effective January 1$ 2022 to $2,500 to match the increase in material pricing.

ii) The company requires customers to make a 40% cash deposit one month before delivery, 50% on delivery and the balance one month after deliveries are made

iii) The company secured a short term bank loan amounting to $3,200,000 in the month of December with monthly repayments of $320,000 expected to start in January 2022.

iv)The company has estimated that the monthly operating expenses will amount to $145,000 while variable cost will be 65% of the expected demand and paid for in

the same month.

v)The company has budgeted to acquire two delivery-vans amounting to $160,000

payable in in the month of March 2022.

vi)As at December 31st 2021, the company had a bank balance amounting to $15,500.

vii)It is the company's policy to have $25,000 at any given time to be able to operate smoothly without any hindrance and to be able to take advantage of any investment opportunity

Prepare a cash budget