Dortex Ltd is a small importer of photocopiers. In recent months it has been selling 50 machines a month at a price of £2,000 each. These machines cost £1,600 each. A new model has just been launched and this is expected to offer greatly enhanced performance. Its selling price and cost will be the same as for the old model. From the beginning of January Year 6, sales are expected to increase at a rate of 20 machines each month until the end of June Year 6, when sales will amount to 170 units per month. They are expected to continue at that level thereafter. Operating costs including depreciation of £2,000 a month are forecast as follows: Jan Feb Mar Mar May June Operating costs (£000) 6 8 10 12 12 12 Dortex expects to receive no credit for operating costs. Additional shelving for storage will be bought, installed and paid for in April, costing £12,000. Corporation tax of £25,000 is due at the end of March. Dortex expects that trade receivables will take two months to pay. To give their customers a good level of service, Dortex plans to hold enough inventories at the end of each period to fulfil anticipated demand from customers in the following month. The photocopier manufacturer, however, grants one month's credit to Dortex. Statement of financial position at 31 December Year 5 £000 ASSETS Non - current assets 80 Current assets Inventories 112 Trade receivables 200 Cash - 312 Total assets 392 EQUITY AND LIABILITIES Equity Share capital - 25p ordinary shares 10 Retained earnings 177 187 Current liabilities Trade payables 112 Taxation 25 Overdraft 68 205 Total equity and liabilities 392 Required: Prepare a cash budget for Dortex Ltd showing the cash balance or required overdraft for the six months ending 30 June Year 6. (Fill in the relevant cells with its corresponding figures. Negative figures should be entered in brackets.) Dortex Ltd The cash budget for the six months to 30 June is: Jan Feb Mar Apr May June £000 £000 £000 £000 £000 £000 Receipts Credit sales Payments Trade payables Operating expenses Shelving Taxation Cash flow Opening balance Closing balance

Dortex Ltd is a small importer of photocopiers. In recent months it has been selling 50 machines a month at a price of £2,000 each. These machines cost £1,600 each. A new model has just been launched and this is expected to offer greatly enhanced performance. Its selling price and cost will be the same as for the old model. From the beginning of January Year 6, sales are expected to increase at a rate of 20 machines each month until the end of June Year 6, when sales will amount to 170 units per month. They are expected to continue at that level thereafter. Operating costs including depreciation of £2,000 a month are forecast as follows: Jan Feb Mar Mar May June Operating costs (£000) 6 8 10 12 12 12 Dortex expects to receive no credit for operating costs. Additional shelving for storage will be bought, installed and paid for in April, costing £12,000. Corporation tax of £25,000 is due at the end of March. Dortex expects that trade receivables will take two months to pay. To give their customers a good level of service, Dortex plans to hold enough inventories at the end of each period to fulfil anticipated demand from customers in the following month. The photocopier manufacturer, however, grants one month's credit to Dortex. Statement of financial position at 31 December Year 5 £000 ASSETS Non - current assets 80 Current assets Inventories 112 Trade receivables 200 Cash - 312 Total assets 392 EQUITY AND LIABILITIES Equity Share capital - 25p ordinary shares 10 Retained earnings 177 187 Current liabilities Trade payables 112 Taxation 25 Overdraft 68 205 Total equity and liabilities 392 Required: Prepare a cash budget for Dortex Ltd showing the cash balance or required overdraft for the six months ending 30 June Year 6. (Fill in the relevant cells with its corresponding figures. Negative figures should be entered in brackets.) Dortex Ltd The cash budget for the six months to 30 June is: Jan Feb Mar Apr May June £000 £000 £000 £000 £000 £000 Receipts Credit sales Payments Trade payables Operating expenses Shelving Taxation Cash flow Opening balance Closing balance

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6EB: Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit...

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Question

Dortex Ltd is a small importer of photocopiers. In recent months it has been selling 50 machines a month at a price of

£2,000

each. These machines cost

£1,600

each. A new model has just been launched and this is expected to offer greatly enhanced performance. Its selling price and cost will be the same as for the old model. From the beginning of January Year 6, sales are expected to increase at a rate of 20 machines each month until the end of June Year 6, when sales will amount to 170 units per month. They are expected to continue at that level thereafter. Operating costs including depreciation of

£2,000

a month are forecast as follows:

		Jan		Feb		Mar		Mar		May		June
Operating costs (£000)		6		8		10		12		12		12

Dortex expects to receive no credit for operating costs. Additional shelving for storage will be bought, installed and paid for in April, costing

£12,000.

Corporation tax of

£25,000

is due at the end of March. Dortex expects that trade receivables will take two months to pay. To give their customers a good level of service, Dortex plans to hold enough inventories at the end of each period to fulfil anticipated demand from customers in the following month. The photocopier manufacturer, however, grants one month's credit to Dortex.

Statement of financial position at 31 December Year 5
		£000
ASSETS
Non - current assets		80
Current assets
Inventories		112
Trade receivables		200
Cash		-
		312
Total assets		392
EQUITY AND LIABILITIES
Equity
Share capital - 25p ordinary shares		10
Retained earnings		177
		187
Current liabilities
Trade payables		112
Taxation		25
Overdraft		68
		205
Total equity and liabilities		392

Required:

Prepare a cash budget for Dortex Ltd showing the cash balance or required overdraft for the six months ending 30 June Year 6.

(Fill in the relevant cells with its corresponding figures. Negative figures should be entered in brackets.)

Dortex Ltd

The cash budget for the six months to 30 June is:

Jan

Feb

Mar

Apr

May

June

£000

Receipts

Credit sales

Payments

Trade payables

Operating expenses

Shelving

Taxation

Cash flow

Opening balance

Closing balance

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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