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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:

  1. Prepare a production budget for HAZEL Ltd for the months of September to December 2022 and in total.
  2. Identify and explain FOUR purposes of budgeting

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