Question 3 (Cash budget)The following budgeted statement of profit or loss has been prepared for KandaLtd for the four months January to April 2017:JanuaryFebruaryMarchAprilGheGheGheGheSales70,00085,00060,00063,000Cost of sales45,00057,50052,50045,000Gross profitAdministration and selling overhead18,000(12,000)25,00027,500(17,500)17,500(10,000)(10,500)Net profit before interest15,00010,0007.0006,000a. 50% of the cost of sales relates to material purchases for the month.Materials are paid for one month after purchase. Material cost payable as at1st January 2017 is GH¢30,000b. 30% of the cost of sales relates to direct labour which is paid for whenincurred.c. The remainder of the cost of sales is production overhead (Fixed andVariable).d. Gh¢6,000 per month is a fixed overhead cost which includes Gh¢2,000depreciation. Fixed production overhead costs are paid for when incurred.e. The remaining overhead is variable. The variable production overhead ispaid 60% in the month of usage and the balance one month later. Unpaidvariable production overhead at the beginning of January is Gh¢5,000.f. The administration and selling costs are paid quarterly in advance on 1January, 1 April, 1 July and 1 October. The amount payable is Gh¢15,000per quarter.g. All sales are on credit. 40% of receivables are expected to be paid in themonth of sale and 60% in the following month. Unpaid trade receivables atthe beginning of January were Gh¢35,000.h. The company intends to purchase capital equipment costing Gh¢25,000 inFebruary which will be paid for immediately.i. The bank balance on 1 January 2017 is expected to be Gh¢25,000.Required:Prepare a cash Budget for January to March 2017

Cash Budget The purpose of preparing the cash budget of the firm to know the allocation of cash for…

f. The administration and selling costs are paid quarterly in advance on 1 January, 1 April, 1 July and 1 October. The amount payable is Gh¢ 15,000 per quarter. g. All sales are on credit. 40% of receivables are expected to be paid in the month of sale and 60% in the following month. Unpaid trade receivables at the beginning of January were Gh¢35,000. h. The company intends to purchase capital equipment costing Gh¢25,000 in February which will be paid for immediately. i. The bank balance on 1 January 2017 is expected to be Gh¢25,000. Required: Prepare a cash Budget for January to March 2017

f. The administration and selling costs are paid quarterly in advance on 1 January, 1 April, 1 July and 1 October. The amount payable is Gh¢ 15,000 per quarter. g. All sales are on credit. 40% of receivables are expected to be paid in the month of sale and 60% in the following month. Unpaid trade receivables at the beginning of January were Gh¢35,000. h. The company intends to purchase capital equipment costing Gh¢25,000 in February which will be paid for immediately. i. The bank balance on 1 January 2017 is expected to be Gh¢25,000. Required: Prepare a cash Budget for January to March 2017

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter8: Budgeting

Section: Chapter Questions

Problem 1PB

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