Question 1.2 The budgeted balance sheet data of Umbago Ltd is as follows: Balance sheet as at 1st March Non-Current assets: Cost Depreciation NBV Land and Building 500,000 500,000 Machinery and Equipment 124,000 84,500 39,500 Motor vehicles 42,000 16,400 25,600 666,000 100,900 565,100 Current Assets Stock of raw materials (100 units) 4,320 Stock of finished goods (110 units)a 10,450 Debtors (January 7,680, February 10,400) 18,080 Cash and Bank 6,790 39,640 Less current liabilities Creditors (raw materials) 3,900 Working Capital 35,740 600,840 Financed by: Ordinary share capital (fully paid 1 per share) 500,000 Share premium 60,000 Profit and loss account 40,840 600,840 a The stock of finished goods was valued at marginal cost The estimates for the next four-month period are as follows: March April May June Sales (units) 80 84 96 94 Production (units) 70 75 90 90 Purchase of raw materials (units) 80 80 85 85 Wages and variable overheads @ 65 per unit 4,550 4,875 5,850 5,850 Fixed overheads 1,200 1,200 1,200 1,200 The company intends to sell each unit for 219 and has estimated that it will have to pay 45 per unit for raw materials. One unit of raw material is needed for each unit of finished product. All sales and purchases of raw materials are on credit. Debtors are allowed two months' credit and suppliers of raw materials are paid after one month's credit. The wages, variable overheads and fixed overheads are paid in the month in which they are incurred. Page | 3 Cash from a loan secured on the land and building of 120,000 (at 7.5% interest rate) is due to be received on 1st May. Machinery costing 112,000 will be received in May and paid for in June. The loan interest is payable half yearly from September onwards. An interim dividend to 31 March of 12,500 will be paid in June. Depreciation for the four months, including that on the new machinery, is: Vehicle and equipment 15,733 Motor vehicle 3,500 The company uses the FIFO method of stock valuation. Ignore taxation. Required: a) Calculate and present the raw materials budget and finished goods budget in terms of units, for each month from March to June inclusive. (5 marks) b) Calculate the corresponding sales budget, the production cost budgets and the budgeted closing debtors, creditors and stocks in terms of value. (5 marks) c) Prepare and present a cash budget for each of the four months. (6 marks) d) Prepare a master budget, i.e. Budgeted trading profit and loss account, for the four months to 30 June, and budgeted balance sheet as at 30 June (10 marks) e) Advise the company about possible ways in which it can improve its cash management. (9 marks) Total 35 Marks (questions from ACCA Managerial Finance exam)