Melon Investment Ltd is preparing its cash budget for the first five months of the year. The following information is available: Sales for January to May are estimated as follows: October UGX. 40,000; November UGX. 60,000; December UGX. 80,000; January UGX. 50,000, February UGX. 70,000, March UGX. 90,000, April UGX. 100,000, and May UGX. 80,000. The company collects 50% of sales in the month of sale, 40% in the following month, and 10% in the second month after the sale. The company expects to purchase UGX. 20,000; of inventory in October; UGX. 50,000 in November; UGX. 30,000 in December; UGX. 40,000 in January, UGX. 50,000 in February, UGX. 60,000 in March, UGX. 70,000 in April, and UGX. 80,000 in May. The company pays for 50% of inventory purchases in the month of purchase and 50% in the following month. The company's fixed expenses are UGX. 20,000 per month and variable expenses are estimated at 30% of sales. The company has a cash balance of UGX. 10,000 at the beginning of January and requires a minimum cash balance of UGX. 5,000 at the end of each month. Required: prepare a cash budget for Melon Investment Ltd for the months of January to May.
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.
Melon Investment Ltd is preparing its
information is available:
Sales for January to May are estimated as follows: October UGX. 40,000; November UGX. 60,000;
December UGX. 80,000; January UGX. 50,000, February UGX. 70,000, March UGX. 90,000, April
UGX. 100,000, and May UGX. 80,000.
The company collects 50% of sales in the month of sale, 40% in the following month, and 10% in
the second month after the sale.
The company expects to purchase UGX. 20,000; of inventory in October; UGX. 50,000 in
November; UGX. 30,000 in December; UGX. 40,000 in January, UGX. 50,000 in February, UGX.
60,000 in March, UGX. 70,000 in April, and UGX. 80,000 in May.
The company pays for 50% of inventory purchases in the month of purchase and 50% in the
following month.
The company's fixed expenses are UGX. 20,000 per month and variable expenses are estimated
at 30% of sales.
The company has a cash balance of UGX. 10,000 at the beginning of January and requires a
minimum cash balance of UGX. 5,000 at the end of each month.
Required: prepare a cash budget for Melon Investment Ltd for the months of January to May.
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