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Question 1 From the following information prepare a monthly cash budget for the three months ending 31st Dec.2020 Month Sales (RM) Materials (RM) Wages (RM)

Question 1

From the following information prepare a monthly cash budget for the three months ending 31st Dec.2020

Month Sales (RM) Materials (RM) Wages (RM) Production (RM) Admin. Selling, etc (RM)
June 6,000 3,600 1,300 450 320
July 6,500 4,000 1,500 450 320
Aug. 7,000 4,800 1,500 500 350
Sep. 7,500 4,500 1,500 600 350
Oct. 8,000 4,600 1,600 600 400
Nov. 8,500 5,000 1,800 700 400
Dec. 9,000 5,200 2,000 700 450

Credit terms

Sales 3 months to debtors. 10% of sales are on cash. On an average, 50% of credit sales are paid on the due dates while the other 50% are paid in the month following

Creditors for material 2 months.

Lag in payment

Wages. 1/4 month, overheads 1/2 month.

Other information

Plant and Machinery to be installed in Aug. at a cost of RM30,000. It will be paid for by monthly installments of RM1,000 each from 1st Oct.;

Preference share dividend @ 6% on RM100,000 are to be paid on 1st Dec.

Calls on 500 equity shares @ RM2 per share expected on 1st November;

Dividends from investments amounting to RM500 are expected on 31st Dec.;

Income tax (advance) to be paid in December RM 1,000

Cash and Bank Balance on 1st Oct. expected RM3,000.

Required:

Prepare cash budget for 3 months period ending 31st December 2020 in detail with appropriate workings.

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