Math Problem Solver

QUESTION 2

You are in charge of making forecasts and preparing budgets. You have been supplied with cost and revenue forecasts and details of payment as follows:

1. Forecast of revenue and costs for the quarter ending 31 March 2001

January February March

Shs. Shs. Shs.

Direct

Materials (purchases) 112,000 100,000 135,000

Wages 90,000 80,000 100,000

Overhead

Production 34,000 32,000 40,000

Administration 22,000 20,000 27,000

Selling and distribution 13,000 11,000 18,000

Sales 360,000 350,000 440,000

2. Forecast of revenue and costs for the quarter ending 30 June 2001

April May June

Sh. Sh. Sh.

Direct

Materials (purchases) 90,000 67,000 79,000

Wages 72,000 54,000 63,000

Overhead

Production 45,000 36,000 40,000

Administration 22,000 25,000 27,000

Selling and distribution 13,000 11,000 16,000

Sales 350,000 360,000 360,000

Cash balance on 1 April 2001 Sh. 90,000

Other details

• Period of credit allowed by suppliers averages two months.

• Debenture to the value of Shs. 125,000 are being issued in May 2001 and the amount is expected to be received during the month.

• A new machine is being installed at the end of March 2001 at a cost of Sh 150,000 and payment is promised in early May 2001.

• Sales commission of 3% is payable within one month of sales.

• A dividend of Sh 100,000 is to be paid in June 2001.

• There is a delay of one month in the payment of overheads. There is also a delay in payment of wages averaging a quarter of a month.

• Twenty per cent of the debtors pay cash, receiving a cash discount of 4% and 70% of debtors pay within one month and receive a cash discount of 2 ½%. The other debtors pay within two months.

Required:

A cash budget on a monthly basis from the second quarter of the year 2001.