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QUESTION 3: PANDA LTD PANDA Ltd's budgeted sales for Dec - May months are as follows: Production (UNITS) Sales (UNITS) December 500 400 January 600

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QUESTION 3: PANDA LTD PANDA Ltd's budgeted sales for Dec - May months are as follows: Production (UNITS) Sales (UNITS) December 500 400 January 600 500 February 650 600 March 700 650 April 750 700 May 800 750 The selling price per unit will be 130. All sales will be made on credit. The business plans to offer a cash discount (of 5% of the amount owed) to those customers who pay within the same of the month of sale. Customers for 70% of units sold are expected to qualify for the discount. Remaining 30% of the sales is expected to be paid during the next month (l.e one month later). It is planned that sufficient finished goods inventories for each month's sales should be available at the end of the previous month. The selling price per unit will be 130. All sales will be made on credit. The business plans to offer a cash discount (of 5% of the amount owed) to those customers who pay within the same of the month of sale. Customers for 70% of units sold are expected to qualify for the discount Remaining 30% of the sales is expected to be paid during the next month (.e one month later). it is planned that sufficient finished goods inventories for each month's sales should be available at the end of the previous month. For raw material purchases, the cost of raw material is $30 per unit. It is bought in the month of production and paid one month in arrears (le later). The direct labour cost, which is variable with the level of production, is planned to be 18 per unit of finished production and it is paid in the month of production. Overhead costs are planned to be $11,000 each month including 5,000 for depreciation. Overhead costs are paid in the same month. Company bought an equipment for 180,000 in Jan and equal payments were made over Jan-Mar. Opening cash balance at the start of Jan (15) is 70,000. Required: Draw up a cash budget for the 3 months from 1 January to 31 March, with a column for each month. The budget should, among other things, show each end-of-month cash balance. (30 marks)

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