Candy Enterprise Limited has GH¢13,500 cash at hand on January 1 and has collected the following budget data: January February March Sales Direct materials purchases Direct labour costs Manufacturing overheads (includes depreciation of GH¢2,100 per month) GH¢ 528,000 180,000 135,000 55,000 GH¢ 560,000 160,000 114,000 53,000 GH¢ 600,000 190,000 140,000 54,000 Additional Information: 1.Assume that Sales are all on credit and collection is done as follows: 60% in the month of the sale 30% in the month after the sale 10% two months after the sale 2. Purchases of materials are paid for as follow: 50% in the month of purchase 50% in the month after the purchase 3. Direct labour costs and manufacturing overhead costs are paid in the month incurred. Additionally, assume Candy has cash payments for selling and administrative expenses including salaries of GH¢45,000 per month plus commissions that are 2% of sales, all paid in the month of sale. 4. The Enterprise requires a minimum cash balance of GH¢10,000. Required: a. Prepare a cash budget for January, February and March. b. Will Candy Enterprise Limited need to borrow cash by the end of March?
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.
Candy Enterprise Limited has GH¢13,500 cash at hand on January 1 and has collected the following budget data:
|
|
January |
February |
March |
|
Sales Direct materials purchases Direct labour Manufacturing |
GH¢ 528,000 180,000 135,000 55,000 |
GH¢ 560,000 160,000 114,000 53,000 |
GH¢ 600,000 190,000 140,000 54,000 |
Additional Information:
1.Assume that Sales are all on credit and collection is done as follows:
60% in the month of the sale
30% in the month after the sale
10% two months after the sale
2. Purchases of materials are paid for as follow:
50% in the month of purchase
50% in the month after the purchase
3. Direct labour costs and manufacturing overhead costs are paid in the month incurred. Additionally, assume Candy has cash payments for selling and administrative expenses including salaries of GH¢45,000 per month plus commissions that are 2% of sales, all paid in the month of sale.
4. The Enterprise requires a minimum cash balance of GH¢10,000.
Required:
a. Prepare a
b. Will Candy Enterprise Limited need to borrow cash by the end of March?
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