From the following information which relates to George and Zola, prepare a month by month cash budget for the second half of 20X5 and make brief comments as you consider might be helpful to management. The company's only product, a leather bag, sells at K40 and has a variable cost of K26 made up as Material K20 Labour K4 Variable overhead K2 Fixed costs of K6000 per month are paid on the 28th of each month. Quantities sold/'to be sold on credit May June July August September October November December 1000 1200 1400 1600 1800 2000 2200 2600 Production quantities May June July August September October November December 1200 1400 1600 2000 2400 2600 2400 2200 Cash sales at a discount of 5% are expected to average 100 units a month. Customers are expected to settle their accounts by the end of the second month following sale. Suppliers of material are paid two months after the material is used in production. 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 Company tax of K18,000 is to be paid in October. A new delivery vehicle was bought in June, the cost of which, K8,000 is to be paid in August. The old vehicle was sold for K600, the buyer undertaking to pay in July. The company is expected to be K3,000 overdrawn at the bank at 30 June 20X5. The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
From the following information which relates to George and Zola, prepare a month by month
- The company's only product, a leather bag, sells at K40 and has a variable cost of K26 made up as
Material K20
Labour K4
Variable overhead K2
- Fixed costs of K6000 per month are paid on the 28th of each month.
- Quantities sold/'to be sold on credit
May June July August September October November December
1000 1200 1400 1600 1800 2000 2200 2600
- Production quantities
May June July August September October November December
1200 1400 1600 2000 2400 2600 2400 2200
- Cash sales at a discount of 5% are expected to average 100 units a month.
- Customers are expected to settle their accounts by the end of the second month following sale.
- Suppliers of material are paid two months after the material is used in production.
- 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
- Company tax of K18,000 is to be paid in October.
- A new delivery vehicle was bought in June, the cost of which, K8,000 is to be paid in August. The old vehicle was sold for K600, the buyer undertaking to pay in July.
- The company is expected to be K3,000 overdrawn at the bank at 30 June 20X5.
- The opening and closing inventories of raw materials, work in progress and finished goods are budgeted to be the same.
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