Question

Roselle Sdn Bhd is in the process of preparing the budget for the first quarter of 2021. The following data and estimates are available: Month Sales (RM) Purchases (RM) 167,000 169,000 Overheads (RM) 24,500 26,000 November 2020 December 2020 January 2021 February 2021 March 2021 258,000 264,000 268,000 270,000 273,000 172,000 176,000 180,000 26,750 28,875 30,625 Additional information 20% of the monthly sales is on cash basis which is entitled to 5% cash discount while the remainder is on credit basis.70% of the credit sales will be collected one month after sales, and the balance will be settled by debtors two months after sales. All purchases are on credit. Payments for the purchases will be 50% in the month of purchase, and 50% two months after the purchase. The overheads include RM7,500 monthly depreciations on office equipment and motor vehicles. The payment of the overheads will be settled at the end of month. Salaries and wages are RM26,500 per month. In March 2021, the business is expected to hire three (3) additional part time workers at a salary of RM1,200 per month each. The salaries and wages are paid on the third week of each month. A consultation fee of RM24,000 is expected to be paid in January 2021. A new machine costing RM100,000 will be bought in February 2021. A 10% deposit will be paid immediately upon purchase. The remaining amount will be paid in 48 monthly instalments starting March 2021. The closing balance at the end of the fourth quarter 2020 is RM5,000 Required: a) State FOUR (4) advantages of having surplus of cash in hand for a business b) Prepare a monthly Cash Budget for the first quarter of 2021 for Roselle Sdn Bhd