A company is in the process of preparing a cash budget for January to March 2024. The company has actual sales in October and November 2023 of GHS 100,000. December sales are expected to remain at this level but a new advertising initiative to be launched on 1 January 2024 are expected to lead to a month on month increase in sales of GHS 10,000 per month for the first 6 months of next year.Cost of sales is budgeted to be 60% of the sales figure in each month. It is the company's policy to have enough closing inventory at each month end to cover 10% of the next month sales. This means that if sales in month 2 are expected to be 100 to closing inventory at the end of month 1 will be 6 being 10% x 100 x 60%. Half of all purchases in each month are paid for in that month and the remaining balance is paid in the next month.
A company is in the process of preparing a cash budget for January to March 2024. The company has actual sales in October and November 2023 of GHS 100,000. December sales are expected to remain at this level but a new advertising initiative to be launched on 1 January 2024 are expected to lead to a month on month increase in sales of GHS 10,000 per month for the first 6 months of next year.Cost of sales is budgeted to be 60% of the sales figure in each month. It is the company's policy to have enough closing inventory at each month end to cover 10% of the next month sales. This means that if sales in month 2 are expected to be 100 to closing inventory at the end of month 1 will be 6 being 10% x 100 x 60%. Half of all purchases in each month are paid for in that month and the remaining balance is paid in the next month.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter7: The Master Budget And Flexible Budgeting
Section: Chapter Questions
Problem 1E: The sales department of Macro Manufacturing Co. has forecast sales for its single product to be...
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