iven below to answer the following questions: Prepare the Cash Budget for January, February and March Comment on the cash position of the company for the budgeted INFORMATION Some of the items in the Statement
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.
REQUIRED
Use the information given below to answer the following questions:
- Prepare the
Cash Budget for January, February and March - Comment on the cash position of the company for the budgeted
INFORMATION
- Some of the items in the
Statement of Financial Position as at 31 December 2021 of Lomax Ltd are as follows:
|
Current assets |
R |
|
Accounts receivable |
1 300 000 |
|
Bank |
235 000 |
|
Current liabilities |
|
|
Accounts payable (for material purchases) |
95 000 |
|
Other current liabilities |
700 000 |
- The following
forecasts have been made by Lomax Ltd for the first three months of 2022 for the bricks that it produces which are sold in pallets (with each pallet comprising 500 bricks):- The sales manager anticipates the following credit sales:
|
January |
February |
March |
|
2 160 pallets |
2 340 pallets |
2 250 pallets |
The bricks are sold at a constant price of R500 per pallet. Ten percent (10%) of the sales are for cash and the rest is on credit. Debtors pay their accounts one month after the sale is made.
- The costs of production include the following:
|
Direct materials |
R0.14 per brick |
|
Direct labour |
R0.08 per brick |
|
Variable manufacturing |
R0.04 per brick |
- The purchases manager expects to purchase materials to manufacture the following number of pallets each month:
|
January |
February |
March |
|
2 400 |
2 600 |
2 500 |
No inventories of materials are held at the end of each month.
- Sixty percent (60%) of the materials are purchased for cash in order to take advantage of a 5% discount and the balance is purchased on credit. Creditors are paid in the month after the
- Direct labour costs are incurred in line with production and will be paid during the month in which they are
- Variable manufacturing overheads are payable in the month in which they are
- Fixed manufacturing and non-
manufacturing costs are expected to amount to R550 000 per month, excludingdepreciation of R75 000 per month. These costs are payable in the month in which they are - The sales commission of 6% is payable in the month in which it is
- Additional administration costs of R40 per unit sold are payable in the month in which they are
- 10 The company will invest 10% of the total sales for March in a notice deposit account on 31 March 2022.
- The balance of the current liabilities as at 31 December 2021 will be settled during January
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