The Goose Grease Company had cash of KES 13,000 on hand on January 1, 2020. During the
year 2020, the company expected the following cash collections from the customers by
quarters:
Quarter 1Quarter 2Quarter 3Quarter 4
Cash collections110,000177,500183,700136,000
Budgeted Direct Materials65,00075,00055,00050,000
Budgeted production (units)1,5002,0001,7001,500
Average Labour rate is KES 40
The company planned to pay dividends of KES 10,000 per quarter during the year. During
July new equipment was to be bought at KES 60,000. An additional KES 16,000 was planned
for installation during the fourth quarter.
The company was required to maintain cash balance of KES 15,000.A line of credit is also
available for short term borrowing. All borrowings are made at the beginning of a quarter and
repaid at the end od the quarter. Interest on short term borrowings will be paid at a rate of
0.5% per quarter on the amount repaid in any quarterwhen the loan repayment is made. All
other interest expense will be accrued each quarter.
Required:
Prepare Cash Budget by quarter and for the year in total
CQ 2 Budgeting _002
You are the management accountant of a group of companies and your managing director has
asked you to explore the possibilities of introducing a zero-base budgeting system
experimentally in oneof the operating companies in place of its existing orthodox system. You
are required to prepare notes for a paper for submission to the board that sets out:
(a)How zero-base budgeting would work within the company chosen;
(b)What advantages it might offer over the existing system;
(c)What problems might be faced in introducing a zero-base budgeting scheme;
(d)The features you would look for in selecting the operating company for the introduction
in order to obtain the most beneficial results from the experiment.