Assumptionsi. Suppliers of “old” laptop units will allow one month’s credit.ii. Customers are expected to take two months’ credit.iii. Wages will be paid as they are incurred in production.iv. Fixed overhead costs will be paid as they are incurred.v. The stock of finished goods at the end of each quarter will besufficient to satisfy 20% of the planned sales of the followingquarter.vi. The stock of “old” laptop units will be held constant at 1,000units.vii. It may be assumed that the year is divided into quarters ofequal length and that sales, production and purchases arespread evenly throughout any quarter. RequiredProduce, for each quarter of the first year of operations:(a) The cash budget (show all workings). Newtrend Ltd is a new business which has been formed to buy “old"laptop units and modify them to the specific needs of customers.The business will acquire fixed assets costing £200,000 and a stock of1,000 “old" laptop units on the first day of business. The fixed assetsare expected to have a five-year life with no residual value at theend of that time. That is depreciation is charged for five years.Year 1Year 2Quarter 1Quarter 2Quarter 3Quarter 4Quarter 1Modified laptop units 8,1008,4008,7007,8008,100The selling price of each unit will be £90.The cost of production of each unit is specified as follows:Cost of standard unit purchasedDirect labour3033Fixed overhead1275

Name: Assumptionsi. Suppliers of “old” laptop units will allow one month’s c
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Description: Assumptionsi. Suppliers of “old” laptop units will allow one month’s credit.ii. Customers are expected to take two months’ credit.iii. Wages will be paid as they are incurred in production.iv. Fixed overhead costs will be paid as they are incurred.v.

Budgeting: It is a process of planning the work to be performed. Under this process a formal plan is…

Answered: Assumptions i. Suppliers of “old”…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Assumptions
i. Suppliers of “old” laptop units will allow one month’s credit.
ii. Customers are expected to take two months’ credit.
iii. Wages will be paid as they are incurred in production.
iv. Fixed overhead costs will be paid as they are incurred.
v. The stock of finished goods at the end of each quarter will be
sufficient to satisfy 20% of the planned sales of the following
quarter.
vi. The stock of “old” laptop units will be held constant at 1,000
units.
vii. It may be assumed that the year is divided into quarters of
equal length and that sales, production and purchases are
spread evenly throughout any quarter.

Required
Produce, for each quarter of the first year of operations:
(a) The cash budget (show all workings).

Newtrend Ltd is a new business which has been formed to buy “old"
laptop units and modify them to the specific needs of customers.
The business will acquire fixed assets costing £200,000 and a stock of
1,000 “old" laptop units on the first day of business. The fixed assets
are expected to have a five-year life with no residual value at the
end of that time. That is depreciation is charged for five years.
Year 1
Year 2
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Quarter 1
Modified laptop units 8,100
8,400
8,700
7,800
8,100
The selling price of each unit will be £90.
The cost of production of each unit is specified as follows:
Cost of standard unit purchased
Direct labour
30
33
Fixed overhead
12
75

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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