Top Sdn Bhd had cash of RM13,000 on hand together with trade debtors outstandingbalance of RM55,000 as at January 1. During the year, the company expected thefollowing sales to customers by quarter, with collection terms of 50% in cash and 50% incredit receivable in the next quarter:FirstSecondThirdFourthSales (RM)110,000245,000122,400149,600Direct materials purchases in metric tons (MT) costing RM 50.00 per MT payable in thesame quarter are as follows:FirstSecondThirdFourthDirect MaterialsPurchases (MT)1,3001,5001,1001,000The production budget showed the following unit production by quarter with an averagelabour wage rate of RM40.00 payable in the same quarter:FirstSecondThirdFourthUnits to be produced1,5002,0001,7001,500Top Sdu Bhd planned to pay dividends of RM10,000 per quarter during the year. In July,a new equipment costing RM60,000 will be purchased. An additional cost of RM16,000was planned for its installation during the fourth quarter.The company was required to maintain a minimum cash balance of RM15,000. A line ofcredit was available for short-term borrowings in increments of RM1,000. Allborrowings will be made at the beginning of a quarter and repaid at the end of thequarter. Interest on the short-term borrowings will be paid at 0.5% per quarter on theamount repaid in any quarter when a loan repayment is made. All other interest expensewill be accrued each quarter.Required:(a)Prepare a cash budget for Top Sdn Bhd by quarter and for the year in total.(b)Cash budget plays a critical role to a business particularly during a financial crisisperiod with slow-down in the economic activities.Advise Top Sdn Bhd what liquidity problems in a business are, how a cashbudget preparation is able to solve these problems and the challenges in workingout a reliable and realistic cash budget.(c)Top Sdu Bhd is considering establishing a sound and effective budgetaryplanning and control system to assist in managing the business with greateefficiency.State THREE (3) main objectives of establishing a budgetary planning andcontrol system in a business organization.

What is meant by Budgeting? It is the process of estimating the future revenues and outflows on the…

Top Sdn Bhd had cash of RM13,000 on hand together with trade debtors outstanding balance of RM55,000 as at January 1. During the year, the company expected the following sales to customers by quarter, with collection terms of 50% in cash and 50% in credit receivable in the next quarter: First Second Third Fourth Sales (RM) 110,000 245,000 122,400 149,600 Direct materials purchases in metric tons (MT) costing RM 50.00 per MT payable in the same quarter are as follows: First Second Third Fourth Direct Materials Purchases (MT) 1 300 500 1 100 1.000

Top Sdn Bhd had cash of RM13,000 on hand together with trade debtors outstanding balance of RM55,000 as at January 1. During the year, the company expected the following sales to customers by quarter, with collection terms of 50% in cash and 50% in credit receivable in the next quarter: First Second Third Fourth Sales (RM) 110,000 245,000 122,400 149,600 Direct materials purchases in metric tons (MT) costing RM 50.00 per MT payable in the same quarter are as follows: First Second Third Fourth Direct Materials Purchases (MT) 1 300 500 1 100 1.000

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 7P

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