QUESTION 3

(20 Marks)

PROJECT LORUS
CASH BUDGET FOR THE PERIOD 01 FEBRUARY TO 30 APRIL 2022
	February (R)		March (R)		April (R)
Cash brought forward
Cash receipts
Total cash receipts
Cash payments
Total cash payments
Net cash flow
Cash position

QUESTION 3 (20 Marks) Use the information provided below to prepare the Cash Budget of Project Lorus for February, March and April 2022. INFORMATION The following information relates to Project Lorus which commenced a year ago. 1. Additional machinery and equipment will be purchased on credit on 28 February 2022 for R1 000 000. A deposit of 40% will be paid on 28 February 2022 and the balance plus finance charges of R50 000 will be paid in five equal monthly instalments commencing March 2022. The monthly rental of the premises costs R120 per square metre. The size of the premises is 500 square metres and 100 square metres is sub-let to a tenant at R130 per square metre. 3. Estimated sales at R70 per unit are as follows: Units January 3 200 February 3400 March 3 500 Units January 3 200 February 3 400 March 3 500 April 3 300 4. Cash sales are expected to comprise 60% of total sales. Customers who purchase for cash are entitled to a 10% cash discount. The balance of the sales will be on credit. Collections from credit sales are expected to be as follows: 1.30% in the month of sale, and 2.65% in the month after the sale. The remaining 5% is expected to be written off as bad debts. 5 Variable manufacturing costs per unit are expected to be as follows: February 2022 3 800 March 2022 3 900 April 2022 3 700 6. Fifty percent (50%) of the direct materials is usually purchased for cash. Forty percent (40%) of the cash purchases are from suppliers who allow a 10% cash discount. The rest of the materials will be purchased on credit and paid for two months after the month of purchase. Direct workers will have their wages paid on the last working day of each month. 8. Sixty percent (60%) of the variable manufacturing overheads will be paid for in the month in which they are incurred. The balance will be paid in the following month. 9. Fixed overheads, excluding depreciation of R4 000 per month, amount to R16 000 per month. Fixed overheads are paid for in the month in which they are incurred. 10 The balance in the bank account on 31 January 2022 is expected to be R300 000