(a)Prepare NiNa plc’s cash budget for the month September 2021. Assume the firm will have a cash balance of £50,000 on 1st of September 2021. (b)Evaluate, along with making appropriate recommendations, NiNa plc’s cash budget for the month of September 2021.
NiNa plc manufactures 1 product; XYZ. It uses materials A and B in
production of XYZ. The Financial Director of Rain plc has asked for your
assistance in producing the
She has provided you with the following information extracted from the
functional budgets:
July August September October
Sales (£) 9,250,000 10,360,000 12,950,000 14,245,000
Production (unit) 50,000 56,000 70,000 77,000
Material A purchase
(£) 1,500,000 1,680,000 2,100,000 2,310,000
Material B purchase
(£) 500,000 560,000 700,000 770,000
Direct labour cost (£) 2,400,000 2,688,000 3,360,000 3,696,000
The following additional information has also been provided to you:
• Sales are 20% cash, 80% credit. Credit sales are paid one month after
the month of sale. NiNa plc allows a 1% cash discount on all of its cash
sales and the firm does not anticipate any
future.
• Payment to material A supplier is made in the month following purchase
and payment to material B supplier is made two months after they are
purchased.
• All of the firm’s direct labour are on zero-hour contracts. Labour rate
per hour is £12.
• Direct labour is paid as they are incurred.
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• Variable production
number of direct labour hours worked and the rate is £3 per direct
labour hour.
• Fixed production overheads are £700,000 per month and they include
depreciation charges of £50,000.
• Fixed selling and administration overheads are 400,000 per month.
• The firm takes one month’s credit on all its overheads (fixed and
variable).
• The firm is planning to purchase new equipment for £3,800,000 cash in
September 2021.
Required:
(a)Prepare NiNa plc’s cash budget for the month September 2021. Assume
the firm will have a cash balance of £50,000 on 1st of September 2021.
(b)Evaluate, along with making appropriate recommendations, NiNa plc’s
cash budget for the month of September 2021.
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