Prepare the 4 months Cash Budget from January to April 2021
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.
The figures in the table below relate to HM Sdn Bhd which is seeking your advice on its financial position.
2020 2021
Expected Results Budgets November (RM) December (RM) January (RM)
February (RM)
March (RM)
April (RM) Sales 60,000 70,000 72,000 66,000 60,000 68,000 Materials 30,000 35,000 36,000 33,000 30,000 34,000 Direct Labour 12,000 14,000 14,400 13,200 12,000 13,600 Overheads 12,600 14,700 15,200 13,800 12,700 14,300 TOTAL COSTS 54,600 63,700 65,600 60,000 54,700 61,900 NET PROFITS 5,400 6,300 6,400 6,000 5,300 6,100
You are provided with the following additional information:
Each month consists of four weeks. 20% of sales are for cash, and 80% on credit. Half the credit customers pay in the month following the month of the sale and the balance two months later. All purchases are on credit and are paid for in the month following the month of the purchase after first deducting a 5% cash discount. Wages are paid one week in arrears. Overheads which include RM2,500 for
…3/-
Required:
a. Prepare the 4 months
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