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CHAPTER 20 /| FORECASTING CASH FLOWS 34 Example: A month-by-month cash budget in detail Now you have some idea as to the underlying principles, let us put these to work. From the following information which relates to George and Zola Co you are required to prepare a month by month cash budget for the second half of 20X5 and to append such brief comments as you consider might be helpful to management. (a) The company's only product, a calfskin vest, sells at $40 and has a variable cost of $26 made up as follows. 24 20 Materials Labour Variable overheads (b) Fixed costs of $6,000 per month are paid on the 28th of each month. (c) Quantities sold/to be sold on credit June May 1,000 July 1,400 Aug 1,600 Sept 1,800 Oct Nov Dec 1,200 2,000 2,200 2,600 (d) Production quantities Oct 2,600 June July 1,600 Aug 2,000 Sept 2,400 Nov Dec May 1,200 1,400 2,400 2,200 (e) Cash sales at a discount of 5% are expected to average 100 units a month. (f) Customers are expected to settle their accounts by the end of the second month following sale. (g) Suppliers of material are paid two months after the material is used in production. (h) Wages are paid in the same month as they are incurred. (i) 70% of the variable overhead is paid in the month of production, the remainder in the followings month. () Corporation tax of $18,000 is to be paid in October. A new delivery vehicle was bought in June, the cost of which, $8,000 is to be paid in August. The old vehicle was sold for $600, the buyer undertaking to pay in July. (k) The company is expected to be $3,000 overdrawn at the bank at 30 June 20X5. The overdrat charged at 2% per month on any brought forward balance. (1) The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same. (m)

CHAPTER 20 /| FORECASTING CASH FLOWS 34 Example: A month-by-month cash budget in detail Now you have some idea as to the underlying principles, let us put these to work. From the following information which relates to George and Zola Co you are required to prepare a month by month cash budget for the second half of 20X5 and to append such brief comments as you consider might be helpful to management. (a) The company's only product, a calfskin vest, sells at $40 and has a variable cost of $26 made up as follows. 24 20 Materials Labour Variable overheads (b) Fixed costs of $6,000 per month are paid on the 28th of each month. (c) Quantities sold/to be sold on credit June May 1,000 July 1,400 Aug 1,600 Sept 1,800 Oct Nov Dec 1,200 2,000 2,200 2,600 (d) Production quantities Oct 2,600 June July 1,600 Aug 2,000 Sept 2,400 Nov Dec May 1,200 1,400 2,400 2,200 (e) Cash sales at a discount of 5% are expected to average 100 units a month. (f) Customers are expected to settle their accounts by the end of the second month following sale. (g) Suppliers of material are paid two months after the material is used in production. (h) Wages are paid in the same month as they are incurred. (i) 70% of the variable overhead is paid in the month of production, the remainder in the followings month. () Corporation tax of $18,000 is to be paid in October. A new delivery vehicle was bought in June, the cost of which, $8,000 is to be paid in August. The old vehicle was sold for $600, the buyer undertaking to pay in July. (k) The company is expected to be $3,000 overdrawn at the bank at 30 June 20X5. The overdrat charged at 2% per month on any brought forward balance. (1) The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same. (m)

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter8: Budgeting For Planning And Control
Section: Chapter Questions
Problem 34E: A companys sales for the coming months are as follows: About 20 percent of sales are cash sales, and...
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12 24 Example: A month-by-month cash budget in detail Now you have some idea as to the underlying principles, let us put these to work. From the following information which relates to George and Zola Co you are required to prepare a month by month cash budget for the second half of 20X5 and to append such brief comments as you consider might be helpful to management. (a) The company's only product, a calfskin vest, sells at $40 and has a variable cost of $26 made up as follows. Materials 24 Labour 20 Variable overheads (b) Fixed costs of $6,000 per month are paid on the 28th of each month. (c) Quantities sold/to be sold on credit June May 1,000 July 1,400 Aug 1,600 Sept 1,800 Oct Nov Dec 1,200 2,000 2,200 2,600 (d) Production quantities July 1,600 Sept 2,400 June Oct Aug 2,000 Nov Dec Мay 1,200 1,400 2,600 2,400 2,200 (e) Cash sales at a discount of 5% are expected to average 100 units a month. (f) Customers are expected to settle their accounts by the end of the second month following sale. (g) Suppliers of material are paid two months after the material is used in production. (h) Wages are paid in the same month as they are incurred. (i) 70% of the variable overhead is paid in the month of production, the remainder in the following month. (1) Corporation tax of $18,000 is to be paid in October. A new delivery vehicle was bought in June, the cost of which, $8,000 is to be paid in August. The old vehicle was sold for $600, the buyer undertaking to pay in July. (k) The company is expected to be $3,000 overdrawn at the bank at 30 June 20X5. The overdraft charged at 2% per month on any brought forward balance. (1) The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same. (m)
Transcribed Image Text:12 24 Example: A month-by-month cash budget in detail Now you have some idea as to the underlying principles, let us put these to work. From the following information which relates to George and Zola Co you are required to prepare a month by month cash budget for the second half of 20X5 and to append such brief comments as you consider might be helpful to management. (a) The company's only product, a calfskin vest, sells at $40 and has a variable cost of $26 made up as follows. Materials 24 Labour 20 Variable overheads (b) Fixed costs of $6,000 per month are paid on the 28th of each month. (c) Quantities sold/to be sold on credit June May 1,000 July 1,400 Aug 1,600 Sept 1,800 Oct Nov Dec 1,200 2,000 2,200 2,600 (d) Production quantities July 1,600 Sept 2,400 June Oct Aug 2,000 Nov Dec Мay 1,200 1,400 2,600 2,400 2,200 (e) Cash sales at a discount of 5% are expected to average 100 units a month. (f) Customers are expected to settle their accounts by the end of the second month following sale. (g) Suppliers of material are paid two months after the material is used in production. (h) Wages are paid in the same month as they are incurred. (i) 70% of the variable overhead is paid in the month of production, the remainder in the following month. (1) Corporation tax of $18,000 is to be paid in October. A new delivery vehicle was bought in June, the cost of which, $8,000 is to be paid in August. The old vehicle was sold for $600, the buyer undertaking to pay in July. (k) The company is expected to be $3,000 overdrawn at the bank at 30 June 20X5. The overdraft charged at 2% per month on any brought forward balance. (1) The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same. (m)
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