Question 1

The following information is budgeted for Adella Sdn Bhd (ASB) for second quarter next year:

AprilMay June

SalesRM110,000RM130,000RM180,000

Purchase of materialsRM85,000RM92,000RM105,000

Rental expensesRM15,000RM15,000RM15,000

Fixed overheadRM60,000RM60,000RM60,000

Variable overheadRM25,000RM15,000RM15,000

Proceeds-sales

of securities RM250,000RM150,000RM300,000

Additional information:

a)All sales at ASB are on credit. ASB expects that 40% are collected in the month ofsales, 58% in the month following the sale, and the remaining 2% are uncollectible.

b)ASB purchase all materials on credit; 80% of purchases are paid for in the month of purchase, the remaining 20% are paid for in the following month. The purchase of materials for the month of March is RM90,000.

c) Fixed overhead include depreciation of RM10,000.

d)Variable overhead and rental expenses are paid within the month they are incurred.

e)The company received 10% dividend from investment of RM600,000 in June.

f)An equipment costing RM65,000 will be purchased in May. Payment of the equipment will be in 4 equal payments starting June.

g)Three (3) administration staff will be employed, and each staff will be paid RM2,000 per month. Payment will be in the month in which they are incurred.

h)In April, the company is planning to purchase a motor van at a cost of RM50,000 which has an estimated useful life of 10 years. Depreciation charge per annum will be RM5,000. Only 30%of the motor van cost will be paid in the month of purchase, while the balance will be paid equally over the next two months.

i)Opening cash balance in April is RM161,000.

The company wishes to maintain a minimum cash balance of RM300,000 at the end of each month. The company borrows money from the bank at 12% interest if necessary, to maintain the minimum cash balance. Assume that borrowed money in this case is for one months.

Required:

a)Prepare a Schedule of Collections for the month of April, May and Jun. (4 Marks)

b)Prepare schedule for payment of materials for April, May and June. (4 Marks)

c) Prepare a cash budget for the months of April, May and June.(17 Marks)