3.1 Showing all relevant workings, prepare a cash budget for January, February and March 2023 in table format. Use the format illustrated below for the cash budget: Cash budget for the three months ending 31 March 2023 January February March N$ N$ N$ 3.2 Calculate the accounts receivable and accounts payable figure for inclusion in the statement of financial position as at 31 March 2023. 3.3 Using the cash budget, you have prepared, what advice would you give to the company
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Question 3
Mischa Furniture Stores (“MFS”) is a company that specialises in office furniture based in Windhoek. Due to the effects of Covid-19, it has become very imperative for the company to manage its
- Budget information for January, February and March 2023 is as follows:
|
January |
February |
March |
|
N$ |
N$ |
N$ |
Sales |
590 000 |
650 000 |
750 000 |
Production costs |
300 000 |
350 000 |
420 000 |
Sales and Administration costs |
150 000 |
170 000 |
200 000 |
Purchase of non-current assets |
- |
- |
120 000 |
- Due to reduced income as a result of Covid-19, the company expects 10% of sales to be on cash and
bad debts of 5% are anticipated. - 60% of the customers will pay in the month after sale and the balance will pay two months after sale.
- As for the period under review, included in the monthly production costs is
depreciation and insurance amounting to N$60 000 combined. - Insurance premium costs N$384 000 annually and is paid in January every year.
- The remaining production costs are paid as: 80% in the month in which they are incurred and the balance in the following month.
- The following balances are anticipated at 1 January 2023:
|
N$ |
Bank balance |
55 000 |
|
611 135 |
- The balance of accounts receivable at 1 January 2023 is comprised of N$459 135 from December 2022 sales and N$152 000 from November 2022 sales.
- Current liabilities at 1 January 2023 comprise of N$100 000 short term loan payable in February 2023 at a premium of 2% and N$60 000 accounts payable incurred in December 2022 for production costs.
- All selling and administration costs are paid in cash in the month in which they are incurred.
- Shareholder dividends will be paid in January 2023 amounting to N$35 000. MFS anticipates receiving a dividend of N$8 000 on their investments in February 2023.
Required: |
Marks |
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3.1 |
Showing all relevant workings, prepare a cash budget for January, February and March 2023 in table format. Use the format illustrated below for the cash budget:
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Cash budget for the three months ending 31 March 2023 |
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January |
February |
March |
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N$ |
N$ |
N$ |
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3.2 |
Calculate the accounts receivable and accounts payable figure for inclusion in the |
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3.3 |
Using the cash budget, you have prepared, what advice would you give to the company |
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