Duncan and the Doughnuts, Scotland’s newest boy band, are planning their

debut three month summer tour which will start in Golspie on July 10th and

finish in Lockerbie on September 30th. Their budgeted details are as follows

Gigs

The group will play 14 gigs in July, but increase that to 16 gigs in each of

August and September. Only 200 fans, paying a cash price of £12 per ticket,

will be allowed at each gig. It is budgeted that 25% of the fans at the gigs will

each spend £10 cash on merchandise.

The group have been asked to support Oasis at their Hampden gig in August

and their Wembley gig in September. They will earn £15,000 for each gig but

the cash will not be paid until one month after the gig has taken place.

Expenses

Venues hired for the Duncan and the Doughnut’s gigs will cost £800 each and

must be paid up front in July for the whole tour.

Wages, for the group’s social media influencer/manager throughout the tour,

of £2,000 each month will be paid one month in arrears.

Touring expenses of £13,000 will be paid EACH month.

On 1st July, the group will purchase, in cash, an old bus for £36,000. This

should last the group three years before being auctioned off for charity.

Tax

The group will provide for a £12,000 tax bill for the three month period.

Financing

The group will set up a company called DD on 1st July. The financing will

come from the band members buying a total of 80,000 ordinary shares at a

nominal value of 70p each. No dividend will be taken during the tour.

Required

a) Prepare a three month (July, August and September) cash budget for

DD.

70% weighting

b) What profit after tax will DD make for the trading period, 1st July to 30th September?