QUESTION 4 (20 marks)

A)Prepare the cash budget of ABACUS Inc. for the quarter October to December, based upon the following data and additional information. (14 marks)

Month

Sales ($)

Purchase

($)

Wages

($)

Selling

Overheads

($)

Production

Overheads

($)

July

90,000

30,000

9,000

7,850

5,580

August

93,500

23,000

9,400

9,300

8,820

September

86,000

48,900

9,900

3,610

9,470

October

78,000

34,560

7,000

3,510

6,880

November

78,500

35,980

18,600

3,400

7,000

December

88,600

37,400

8,000

3,250

7,680

Additional Information:

The Cash balance at 1 October is $ 850000

Purchases are 50% in cash and balance are paid the month Following.

Sales are 50% Cash, 40% Received month following and Balance 10% in the monthfollowing the second month.

A plot of land will be purchased and to be paid in October $ 75000.

Wages are paid one month in arrear and all overheads are paid two months in arrear

ABC Ltd is due to repay a loan of $ 8000 in November.

A dividend of $ 80,000 is expected to be paid in November

B)What are the Benefits and Limitations of Budgeting?