SWEET ROYALE INC.Given the following information, construct a Cash Budget for Sweet Royale Inc. for the thirdquarter of 2023.i)Sales forecasts for the company from April through November 2023:AprilRM600,000AugustRM310,000MayRM650,000SeptemberRM250,000JuneRM450,000OctoberRM860,000JulyRM350,000NovemberRM900,000The sales are 25% on cash basis and 75% on credit.Collections on credit sales are as follows:60% are collected within the first month after-sales.35 % are collected within the second month after-sales5% are uncollectibleiv)Raw materials are purchased two months before sales based on a credit term of 5/35net 65 and are paid one month after purchase. Purchases are 60% of sales.v)Operating expenses are estimated at:Salaries and wages of RM45,000 every month.Rental of RM5000 every month.Utility amount to 2% of the current month's total sales.vi)The corporate tax is RM35,000 and will be paid in September.vii)The company allocates RM5000 as depreciation for fixed assets in August.viii)The firm bought a new machine for RM115,000 and paid an installation cost of aboutRM5,000 in January. The payment for the expenditure on the machine is to be madeinto 12 equal monthly payments starting February onwards.ix)The interest of RM10,000 on marketable securities will be paid in the beginning of eachquarter.x)A quarterly dividend of RM9,000 will be received at the end of each quarter.xi)Ending cash balance for June is RM20,000. The company also intends to maintain aminimum cash balance of RM50,000 every month.ii)E a) Construct a Cash Budget for Sweet Royale Inc. for the third quarter of 2023.b) Comment on the company's cash budget for the third quarter of year 2023.c) Based on your answer in (ii), give recommendations to Sweet Royale Inc.

Based on the information given, we have calculated, the cash sales, collection from credit sales,…

a) Construct a Cash Budget for Sweet Royale Inc. for the third quarter of 2023. b) Comment on the company's cash budget for the third quarter of year 2023. c) Based on your answer in (ii), give recommendations to Sweet Royale Inc.

a) Construct a Cash Budget for Sweet Royale Inc. for the third quarter of 2023. b) Comment on the company's cash budget for the third quarter of year 2023. c) Based on your answer in (ii), give recommendations to Sweet Royale Inc.

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter15: Working Capital Management

Section: Chapter Questions

Problem 10P: CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of...

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Concept explainers

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.

Question

100%

SWEET ROYALE INC.
Given the following information, construct a Cash Budget for Sweet Royale Inc. for the third
quarter of 2023.
i)
Sales forecasts for the company from April through November 2023:
April
RM600,000
August
RM310,000
May
RM650,000
September
RM250,000
June
RM450,000
October
RM860,000
July
RM350,000
November
RM900,000
The sales are 25% on cash basis and 75% on credit.
Collections on credit sales are as follows:
60% are collected within the first month after-sales.
35 % are collected within the second month after-sales
5% are uncollectible
iv)
Raw materials are purchased two months before sales based on a credit term of 5/35
net 65 and are paid one month after purchase. Purchases are 60% of sales.
v)
Operating expenses are estimated at:
Salaries and wages of RM45,000 every month.
Rental of RM5000 every month.
Utility amount to 2% of the current month's total sales.
vi)
The corporate tax is RM35,000 and will be paid in September.
vii)
The company allocates RM5000 as depreciation for fixed assets in August.
viii)
The firm bought a new machine for RM115,000 and paid an installation cost of about
RM5,000 in January. The payment for the expenditure on the machine is to be made
into 12 equal monthly payments starting February onwards.
ix)
The interest of RM10,000 on marketable securities will be paid in the beginning of each
quarter.
x)
A quarterly dividend of RM9,000 will be received at the end of each quarter.
xi)
Ending cash balance for June is RM20,000. The company also intends to maintain a
minimum cash balance of RM50,000 every month.
ii)
E

a) Construct a Cash Budget for Sweet Royale Inc. for the third quarter of 2023.
b) Comment on the company's cash budget for the third quarter of year 2023.
c) Based on your answer in (ii), give recommendations to Sweet Royale Inc.

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