QUESTION $5$

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 R$750000$ cash:

$1.$ New machinery and equipment will be purchased on $02$ January $2024$ for R$300000.$ A deposit of $20\%$

will be paid immediately. The balance of the debt as well as finance charges of R$18000$ will be paid in

$12$ equal instalments commencing February $2024.$

$2.$ Production will commence on $05$ January $2024$ and $30\%$ of the sales for February$$s will be manufactured

in January. Each month thereafter the production will consist of $70\%$ of the current month$$s sales and

$30\%$ of the following month$$s sales.

$3.$ Estimated sales at R$72$ 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 R$30$

Direct labour R$16$

Overheads R$12$

$6.$ 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 R$5000$ per month, are expected to amount to R$40000$ per month

and the fixed costs are paid monthly