HCT_protected.pdf.pdf Question No 3: (10 Marks) Salalah Mills SAOG wishes to arrange overdraft facilities with its banker - Bank Dhofar during the period July 2020 - June 2021 when it will be manufacturing mostly for stocks. As cash budget is one of the crucial budgets for an organization, as it forecast cash position from time to time for a short period or a long period, as it helps coordinating activities of different segments because entire requirement of liquid funds needs to be taken into account while preparing this budget; as because this characteristic of the cash budget, the Manager of Bank Dhofar asked the CEO of Salalah Mills SAOG to provide a Cash Budget for one year (July 2020-June 2021) to understand the company's cash position at the end of each month for next one year; to decide on overdraft facility to the company. For this purpose, the finance manager of the company asked you to forecasts a monthly cash position for one year based on the following information obtained from the books of accounts. (1) Sales forecast for different months are: Sales Amount in Months Sales Amount in Months OMR OMR 500,000 July 2020 August 2020 September 2020 460,000 480,000 500,000 520,000 February 2021 March 2021 April 2021 May 2021 June 2021 July 2021 480,000 420,000 400,000 October 2020 November 2020 360,000 440,000 460,000 400,000 December 2020 January 2021 450,000 (2) Realization from S Page 9 1 14 edit, 25% one month later, MacBook Air CT_protected.pdf.pdf 21 (2) (3) Realization from Sales as follows: 15% immediately, 25% one month later, 40% two months later, 15% three months later and balance represents anticipated bad debts. A 5% discount will be given to customers those paid cash immediately on sales. The company adopts a uniform pricing policy for the materials purchased. The company estimates that cost of materials purchased would be 80% of following month's sales. The payment for purchases will be made in the month following month of receipt of materials. Estimated Direct Wages amount equals to 15% of sales amount. Wages will be paid in the month in which the production occurs. (5) 9 Page (6) (7) Estimated that variable production overheads equals to 10% of sales amount. And, Selling and Distribution overhead at 5% of Sales amount. 70% of Variable Production and 65% Selling and Distribution overheads will be paid in the month in which occurs and reminder will be paid in the subsequent month. Fixed overheads are estimated at OMR 96,000 per annum; are expected to be incurred in equal amounts each month. 60% of the fixed overheads costs will be paid in the month in which they are incurred and 15% in the following month. The balance represents depreciation (8) of noncurrent assets. (9) + due for the previous year The company has Page 114 amounted to OMR 5WzU40. HCT_protected.pdf.pdf murned i equal mounts toch month. 60% of the fixed overheads costs will be paid in the month in which they are incurred and 15% in the following month. The balance represents depreciation of noncurrent assets. (9) The company has to pay the last installment of tax due for the previous year amounted to OMR 50,000 on 1st July 2020. (10) Share premium at 10% on OMR 400,000 Equity shares to be received on 1st November 2020. (11) Estimated cash balance on 1st July 2020 is OMR 300,000 **Use Formatting Instructions for the construction of Table: Text Font: Calibri Font Size: 12 Column width: Column A = 30; Column B 10: Columns Cto 0-12 Row Height: 25 Amount category = Number; Decimal Place -2, Use 1,000 separator Use formula wherever required. Page 10/14 - Q + MacBook Air