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QUESTION 5 ( 2 0 Marks ) REQUIRED Use the information given below to prepare the Cash Budget for each of the first three months

QUESTION 5(20 Marks)
REQUIRED
Use the information given below to prepare the Cash Budget for each of the first three months of operations
(i.e. January, February, March 2024). Use separate monetary columns for each month.
INFORMATION
The following information relates to Arlon Manufacturers which will commence business on 01 January 2024
with R750000 cash:
1. New machinery and equipment will be purchased on 02 January 2024 for R300000. A deposit of 20%
will be paid immediately. The balance of the debt as well as finance charges of R18000 will be paid in
12 equal instalments commencing February 2024.
2. Production will commence on 05 January 2024 and 30% of the sales for Februarys will be manufactured
in January. Each month thereafter the production will consist of 70% of the current months sales and
30% of the following months sales.
3. Estimated sales at R72 per unit are as follows:
Units
January 0
February 8500
March 11000
April 10500
4. Cash sales are expected to comprise 60% of the total sales. A cash discount of 10% will be granted to
these customers. The balance of the sales will be on credit. Thirty percent (30%) of the amount owing is
expected to be received in the month of the sale and the balance in the month after the sale.
5. Variable manufacturing costs per unit are estimated as follows:
Direct materials R30
Direct labour R16
Overheads R12
6. Direct materials will be purchased to meet the production requirements of each month. Sixty percent
(60%) of the purchases is expected to be for cash and the balance on credit. Creditors are expected to be paid in the month after the purchase.
7. Direct labour costs are settled monthly.
8. Variable manufacturing overheads will be paid in the month in which they are incurred.
9. Fixed costs, excluding depreciation of R5000 per month, are expected to amount to R40000 per month and the fixed costs are paid monthly.

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