QUESTION 3 (20 Marks)

Prepare the Cash Budget for a project of Natwest Enterprises for the period 01 March 2022 to 30 April 2022.

INFORMATION

The following information is available for a project of Natwest Enterprises:

1. The bank account in the general ledger is expected to reflect a favourable balance of R50 000 on 28 February 2022.
2. Expected sales at R60 per unit are as follows:

February	March	April
22 000 units	24 000 units	25 000 units

3. Sixty percent (60%) of the sales is usually for cash and the balance is on credit.
4. Collections from credit sales follows the following pattern:

• • 20% in the month of sale and these customers are entitled to a 5% discount.
• • 80% in the month after the sale.

5. The production records for finished goods reflect the following:

Manufacturing costs:	January	February	March	April
Direct materials	R500 000	R540 000	R560 000	R580 000
Direct labour	R320 000	R360 000	?	R407 000
Overheads	R270 000	R280 000	?	?

6. Seventy percent (70%) of the direct materials is purchased on credit and creditors are usually paid two months after the purchase. The balance is purchased for cash, subject to a 10% discount.

7. Employees involved in the production of finished goods are paid monthly. Direct labour costs for April are expected to be 10% more than March.

8. The payment of manufacturing overhead costs is delayed by one month. These overhead costs are expected to increase by 5% each month from March 2022.

9. The selling and administrative costs for February 2022 are expected to be R66 000 and represent a fixed percentage of sales. With effect from 01 March 2022 an increase of two percentage points is expected. These costs are paid in the month in which they are incurred.

10. Natwest Enterprises expects to obtain a loan of R500 000 on 30 April 2022 in order to finance asset modernisation of the project during May 2022. Interest at 12% p.a. is payable in advance for three months on 30 April 2022.

FORMAT:

NATWEST ENTERPRISES
CASH BUDGET FOR THE PERIOD 01 MARCH TO 30 APRIL 2022
	March (R)		April (R)
Cash brought forward
Cash receipts
Total cash receipts
Cash payments
Total cash payments
Net cash flow
Cash position

PLEASE ANSWER IN FULL USING THE TABLE ABOVE.