20. The directors of Lunar Plc are considering investment in new equipment to increase the firm's flexibility. The finance director has asked you to evaluate how much cash the company will have available at the end of March 2020. You have been provided with the following information: а) The sales forecast for the period from November 2019 to March 2020: Nov-19 Dec-19 Jan-20 Mar-20 Feb-20 240 Sales (Unit) Unit price 210 250 190 220 £175 £180 £200 £205 £210 b) 40% of customers pay in the month of sale, the rest pay in the following month. c) Purchases are 65% of the previous month's sales revenue. All purchases are on credit and are paid for in the month following the purchase. Wages of £8,500 are paid monthly. The sales team earn commission of 3% of monthly sales revenue and this is paid in the month following the sale. Charges for light and heat are £750 per month and are paid every 2 months starting from January 2020. Advertising cost is paid at £2,500 per month. At the end of December 2019 Meridian plc has a bank balance of £46,000. d) e) f) Required (a) Prepare a cash budget for each month from January 2020 to March 2020. (b) Advise managers on the actions that can be taken to avoid a cash deficit situation.

20. The directors of Lunar Plc are considering investment in new equipment to increase the firm's flexibility. The finance director has asked you to evaluate how much cash the company will have available at the end of March 2020. You have been provided with the following information: а) The sales forecast for the period from November 2019 to March 2020: Nov-19 Dec-19 Jan-20 Mar-20 Feb-20 240 Sales (Unit) Unit price 210 250 190 220 £175 £180 £200 £205 £210 b) 40% of customers pay in the month of sale, the rest pay in the following month. c) Purchases are 65% of the previous month's sales revenue. All purchases are on credit and are paid for in the month following the purchase. Wages of £8,500 are paid monthly. The sales team earn commission of 3% of monthly sales revenue and this is paid in the month following the sale. Charges for light and heat are £750 per month and are paid every 2 months starting from January 2020. Advertising cost is paid at £2,500 per month. At the end of December 2019 Meridian plc has a bank balance of £46,000. d) e) f) Required (a) Prepare a cash budget for each month from January 2020 to March 2020. (b) Advise managers on the actions that can be taken to avoid a cash deficit situation.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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