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CASH BUDGET: QUESTION The following data pertains to a shop. The owner has made the following sales forecasts for the first 5 months of the coming year. Amount ($) January40000 February45000 March55000 April60000 May50000 Document Preview:

CASH BUDGET: QUESTION The following data pertains to a shop. The owner has made the following sales forecasts for the first 5 months of the coming year. Amount ($) January 40000 February 45000 March 55000 April 60000 May 50000 Other data are as follows: (a) Debtors & creditors balances at the beginning of the year are & 30000 and $ 14000 , respectively. The balances of other relevant assets ad liabilities are: Cash balance 7500 Stock 51000 Accrued sales commission 3500 (b) 40% sales are on cash basis. Credit sales are collected in the month following sale. (c) Cost of sale is 60% of sales (d) The only other variable cost is a 5% commission to sales agents. Sales commission is paid in the month after it is earned. i.e time lag is one month; 80% sales are subject to the commission. (e) Inventory (stock) is kept equal to sales requirements for the next two months budgeted sales. (f) Trade creditors are paid in the following month after purchases. (g) Fixed costs are $ 5000 per month, including $ 2000 depreciation. You are required to prepare a cash budget for each of the first three months of coming year.

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question-2.pdf