Question 5 Naas Freight Systems Ltd is preparing its budgets for the next financial year beginning in July 2016 and has projected the following financial information: (all values 000's) May 2016 June 2016 July 2016 August 2016 September 2016 October 2016 November 2016 December 2016 2. 3. 4. Sales 290 300 320 290 355 360 410 400 Fuel 185 158 205 215 225 230 240 200 Wages Expenses 46 36 55 43 45 39 65 39 39 35 48 48 Notes: 1. 40% of Sales are paid after one month and the balance is paid after two months All fuel purchases are on a one month's credit basis. 80% of the wages are paid in the month in which they are incurred and the balance is paid in the following month Expenses are paid in the month in which they are incurred. Depreciation on trucks and equipment amounting to 9,000 per month is included in expenses. 65 65 70 80 5. The opening cash balance is projected at -72,000 (overdrawn) at 1st July 2016 Required: 6. A replacement truck costing 55,000 will be purchased in August 2016 on a cash basis. 7. Corporation tax of 47,000 will be paid in August 2016 8. Dividends of 35,000 will be paid in July 2016 9. New Shares are planned to be issued in September to bring in 50,000 10. A loan repayment of 40,000 will be made to the bank in November. (a) Prepare a Cash Flow projection on a monthly basis for the six months from July to December 2016. (50%) (b) What are the issues which the company will face during the six months and how might they be resolved? (20%) (c) Discuss the advantages and disadvantages of incremental, zero based and Activity Based budgets. (30%) Total 100%

Naas Freight Systems Ltd is preparing its budgets for the next financial year beginning in July 2016 and has projected the following financial information: (all values 000 's) Notes: 1. 40% of Sales are paid after one month and the balance is paid after two months 2. All fuel purchases are on a one month's credit basis. 3. 80% of the wages are paid in the month in which they are incurred and the balance is paid in the following month 4. Expenses are paid in the month in which they are incurred. Depreciation on trucks and equipment amounting to 9,000 per month is included in expenses: 5. The opening cash balance is projected at 672,000 (overdrawn) at 1st July. 2016 6. A replacement truck costing 55,000 will be purchased in August 2016 on a cash basis. 7. Corporation tax of 47,000 will be paid in August 2016 8. Dividends of 35,000 will be paid in July 2016 9. New Shares are planned to be issued in September to bring in 650,000 10. A loan repayment of 40,000 will be made to the bank in November. Required: (a) Prepare a Cash Flow projection on a monthly basis for the six months from July to December 2016. (50%8) (b) What are the issues which the company will face during the six months and how might they be resolved? (20%) (c) Discuss the advantages and disadvantages of incremental, zero based and Activity Based budgets. (30\%6)