Question No. 3

HASF PVT.LTD

BUDGETED INCOME STATEMENT

FOR 1^st QUARTER 1999

Description

JANUARY

FEBRUARY

MARCH

Sales

285,000

323,000

221,000

Purchases

129,000

168,000

95,000

Wages

35,000

37,000

30,000

Supplies

26,000

23,000

21,500

Utilities

6,500

8,700

7,200

Rent

15,000

12,800

13,600

Insurance

12,000

12,000

12,000

Advertising

24,500

28,500

18,000

Depreciation

20,000

20,000

20,000

Net Profit

17,000

13,000

3,700

Required:

a.Please make a cash budget for the months of January, February and March 1999 based on the data for: (5 Marks)

View Receivable Trend:

30% of Sales are collected in the month of sale

30% of Sales are collected after the month of sale

40% of Sales are collected two months after the sale is made

View Payable Trend:

10% of Purchases are paid for in the month of purchase

35% of Purchases are paid after the month of purchase

55% of Purchases are paid two months after the purchase is made

Additional Information:

Rent and Insurance expense were prepaid at the end of 1998

All other expenses are paid for in the month they were incurred

November Sales = 195,000

November Purchases = 100,000

December Sales = 250,000

December Purchases = 165,000

Please see attached Budgeted Income Statement for 1st Quarter 1999

b.Being a CFO of the company, interpret the importance budget in strategic and operational planning of the company (Word limit Max 150-200)