Singha Ltd produces and sells two products, X and Y, using the same type of materials and labour but in different quantities. Budgeted sales units for the next six months (July to December 2022) are as follows: July August September October November December Sales units of X 5,000 4,800 4,200 5,600 7,200 8,000 Sales units of Y 2,400 2,500 2,500 4,000 4,400 5,000 The standard selling prices and variable costs of production of each product is provided in the table below. Product X Product Y £ per unit £ per unit Selling Price £60 £100 Variable Costs of production Material A (£2 per kg) £6 £10 Material B (£3 per kg) £12 £24 Direct labour (£10 per hour) £15 £20 Variable production overhead (£4 per direct labour hour) £6 £8 The management accountant of the company has provided the following additional information. All sales are on account and the collection pattern are 35% collected in the month of sale; 25% collected in the month following the sale and 40% collected in the 2nd month following the sale. No bad debts are anticipated and Singha Ltd provides a 1% discount to customers who pay in the month of sale. Total sales revenue in May and June 2022 were £500,000 and £520,000 respectively. Company policy is for closing inventory of all finished goods to be equal to 10% of the following month’s budgeted sales. On June 30th, there were 500 units of X and 220 units of Y on hand. Management wants both materials A and B on hand at the end of each month to be equal to 20% of the following month’s production requirements (usage). On June 30th there were 5,000 kg of material A and 8,000 kg of material B on hand. One-half (50%) of a month’s purchases of materials A and B are paid for in the month of purchase and the other half is paid in the following month. Singha Ltd has a ‘no layoff’ policy and all employees are paid for 40 hours of work each week. However, all workers agreed to a wage rate of £10 per hour regardless of the hours worked (no overtime pay). For the months July to December 2022, the direct labour workforce will be paid for a minimum of 12,000 hours per month. Wages for labour are paid at the end of the month for their work. Variable production overhead is charged to finished goods at the rate of £4 per direct labour hour worked. Fixed manufacturing overhead is £36,250 per month, including depreciation charges of £1,250. Singha Ltd uses absorption costing principles and fixed manufacturing overhead is applied to units of the products on the basis of direct labour hours worked. Variable administration & selling expenses are £0.50 per unit of X sold and £1 per unit of Y sold. Fixed administration & selling expenses are £10,000 per month. All overheads (fixed and variable) are paid for in the month the costs are incurred. The company will pay a cash dividend of £43,428 as well as purchasing equipment to be used in the business for £180,000 in cash in July 2022. Singha Ltd maintains a 20% open line of credit for £100,000 and maintains a minimum cash balance of £30,000 per month. All borrowings requirements are made on the first day of the month and repayments are made on the last day of the month. The cash balance brought forward at 1st of July is £40,000. REQUIRED (a) Prepare Singha Ltd.’s Cash Budget for the months of July, August and September 2022 and for the quarter ending 30th of September 2022 as a whole.

Singha Ltd produces and sells two products, X and Y, using the same type of materials and labour but in different quantities. Budgeted sales units for the next six months (July to December 2022) are as follows: July August September October November December Sales units of X 5,000 4,800 4,200 5,600 7,200 8,000 Sales units of Y 2,400 2,500 2,500 4,000 4,400 5,000 The standard selling prices and variable costs of production of each product is provided in the table below. Product X Product Y £ per unit £ per unit Selling Price £60 £100 Variable Costs of production Material A (£2 per kg) £6 £10 Material B (£3 per kg) £12 £24 Direct labour (£10 per hour) £15 £20 Variable production overhead (£4 per direct labour hour) £6 £8 The management accountant of the company has provided the following additional information. All sales are on account and the collection pattern are 35% collected in the month of sale; 25% collected in the month following the sale and 40% collected in the 2nd month following the sale. No bad debts are anticipated and Singha Ltd provides a 1% discount to customers who pay in the month of sale. Total sales revenue in May and June 2022 were £500,000 and £520,000 respectively. Company policy is for closing inventory of all finished goods to be equal to 10% of the following month’s budgeted sales. On June 30th, there were 500 units of X and 220 units of Y on hand. Management wants both materials A and B on hand at the end of each month to be equal to 20% of the following month’s production requirements (usage). On June 30th there were 5,000 kg of material A and 8,000 kg of material B on hand. One-half (50%) of a month’s purchases of materials A and B are paid for in the month of purchase and the other half is paid in the following month. Singha Ltd has a ‘no layoff’ policy and all employees are paid for 40 hours of work each week. However, all workers agreed to a wage rate of £10 per hour regardless of the hours worked (no overtime pay). For the months July to December 2022, the direct labour workforce will be paid for a minimum of 12,000 hours per month. Wages for labour are paid at the end of the month for their work. Variable production overhead is charged to finished goods at the rate of £4 per direct labour hour worked. Fixed manufacturing overhead is £36,250 per month, including depreciation charges of £1,250. Singha Ltd uses absorption costing principles and fixed manufacturing overhead is applied to units of the products on the basis of direct labour hours worked. Variable administration & selling expenses are £0.50 per unit of X sold and £1 per unit of Y sold. Fixed administration & selling expenses are £10,000 per month. All overheads (fixed and variable) are paid for in the month the costs are incurred. The company will pay a cash dividend of £43,428 as well as purchasing equipment to be used in the business for £180,000 in cash in July 2022. Singha Ltd maintains a 20% open line of credit for £100,000 and maintains a minimum cash balance of £30,000 per month. All borrowings requirements are made on the first day of the month and repayments are made on the last day of the month. The cash balance brought forward at 1st of July is £40,000. REQUIRED (a) Prepare Singha Ltd.’s Cash Budget for the months of July, August and September 2022 and for the quarter ending 30th of September 2022 as a whole.

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 13CE: Nashler Company has the following budgeted variable costs per unit produced: Budgeted fixed overhead...

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	July	August	September	October	November	December
Sales units of X	5,000	4,800	4,200	5,600	7,200	8,000
Sales units of Y	2,400	2,500	2,500	4,000	4,400	5,000

The standard selling prices and variable costs of production of each product is provided in the table below.

	Product X	Product Y
	£ per unit	£ per unit
Selling Price	£60	£100
Variable Costs of production
Material A (£2 per kg)	£6	£10
Material B (£3 per kg)	£12	£24
Direct labour (£10 per hour)	£15	£20
Variable production overhead (£4 per direct labour hour)	£6	£8

The management accountant of the company has provided the following additional information.

All sales are on account and the collection pattern are 35% collected in the month of sale; 25% collected in the month following the sale and 40% collected in the 2^nd month following the sale. No bad debts are anticipated and Singha Ltd provides a 1% discount to customers who pay in the month of sale.
Total sales revenue in May and June 2022 were £500,000 and £520,000 respectively.
Company policy is for closing inventory of all finished goods to be equal to 10% of the following month’s budgeted sales. On June 30^th, there were 500 units of X and 220 units of Y on hand.
Management wants both materials A and B on hand at the end of each month to be equal to 20% of the following month’s production requirements (usage). On June 30^th there were 5,000 kg of material A and 8,000 kg of material B on hand.
One-half (50%) of a month’s purchases of materials A and B are paid for in the month of purchase and the other half is paid in the following month.
Singha Ltd has a ‘no layoff’ policy and all employees are paid for 40 hours of work each week. However, all workers agreed to a wage rate of £10 per hour regardless of the hours worked (no overtime pay). For the months July to December 2022, the direct labour workforce will be paid for a minimum of 12,000 hours per month. Wages for labour are paid at the end of the month for their work.
Variable production overhead is charged to finished goods at the rate of £4 per direct labour hour worked.
Fixed manufacturing overhead is £36,250 per month, including depreciation charges of £1,250. Singha Ltd uses absorption costing principles and fixed manufacturing overhead is applied to units of the products on the basis of direct labour hours worked.
Variable administration & selling expenses are £0.50 per unit of X sold and £1 per unit of Y sold. Fixed administration & selling expenses are £10,000 per month.
All overheads (fixed and variable) are paid for in the month the costs are incurred.
The company will pay a cash dividend of £43,428 as well as purchasing equipment to be used in the business for £180,000 in cash in July 2022.
Singha Ltd maintains a 20% open line of credit for £100,000 and maintains a minimum cash balance of £30,000 per month. All borrowings requirements are made on the first day of the month and repayments are made on the last day of the month.
The cash balance brought forward at 1^st of July is £40,000.

REQUIRED

(a) Prepare Singha Ltd.’s Cash Budget for the months of July, August and September 2022 and for the quarter ending 30^th of September 2022 as a whole.

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