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Question 1 Actual sales of a retail company, HAZEL Ltd, for November and December2021, together with budgeted monthly sales for January-June 2022, are shown below.
Question 1
Actual sales of a retail company, HAZEL Ltd, for November and December2021, together with budgeted monthly sales for January-June 2022, are shown below.
|
| Sales() |
2021 | November | 180,000(actual) |
| December | 200,000(actual) |
2022 | January | 180,000 |
| February | 160,000 |
| March | 150,000 |
| April | 170,000 |
| May | 140,000 |
| June | 150,000 |
The following information became available to you:
- The purchase price of the goods for HAZEL Ltd for any month is 70% of sales.
- 60% of purchases are payable in the month of the purchase and the remaining amount is payable in the month following the purchase.
- Sales are 40% for cash and 60% on credit.
- 50% of credit sales are collected 1 month after the sale and the other 50% are collected 2 months after the sale. There are no bad debts.
Opening cash balance on 01 January 2022 was 13,600
Required:
- Prepare a production budget for HAZEL Ltd for the months of September to December 2022 and in total.
- Identify and explain FOUR purposes of budgeting
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