QUESTION 5

(20 Marks)

REQUIRED

Prepare the Cash Budget of Electron Ltd for each quarter of 2020. (Ensure that the cash budget has monetary columns for each quarter.)

INFORMATION

The following forecasts were made by Electron Ltd, which produces memory cards, for 2020:

1. Cash at the bank on 31 December 2019 is expected to amount to R125 000.
2. Sales by quarter are projected as follows

	R	Units
First quarter	290 000	2 900
Second quarter	310 000	3 100
Third quarter	330 000	3 300
Fourth quarter	400 000	4 000

3. All sales are for cash only. All memory cards produced in each quarter are sold in the same quarter

4. Each memory card requires 1 hour of direct labour. Employees are paid R20 per hour. Wages are paid for on the 15th and 30th of each month.
5. Direct material purchases for each quarter are expected to be as follows:

First quarter	86 000
Second quarter	89 000
Third quarter	90 000
Fourth quarter	96 000

Direct materials are purchased for cash.

6. Fixed overheads are expected to total R50 000 for each quarter. All fixed costs are paid for in the quarter in which they are incurred.
7. Variable production overheads are expected to amount to R5 per unit produced. All variable overheads are paid for in the quarter in which they are incurred.
8. Fixed selling and administrative expenses are budgeted at R80 000 per quarter and are paid in the same quarter.
9. Variable selling and administrative expenses are budgeted at R4 per unit sold. All selling and administrative expenses are paid for in the quarter in which they are incurred.