Furniture Island manufactures customized dining tables and is in the process of preparing its budgets for the next quarter (April, May and June). To date the following budgeted information has been compiled for one of its popular products ‘Mode’: Mode Budgeted sales (units) April 3,000 May 5,500 June 3,500 July 4,000 Budgeted selling price per unit: £80 80% of sales are on credit. Credit terms are strictly 30 days. 1% of all sales will result in bad debt. Trade receivables outstanding on 31st March were £65,000 (which are all collectible in April). Material X (kilogrammes) 3 kg Material planner has provided the following information: Material X Mode Opening inventory (April) 1,000 kg 1,200 units Closing inventory (June) 1,800 kg x Purchase price (per kilogramme) £2.50 x [ACC2003/LAC2003] [Page 9 of 10] All purchases are paid in the same month to the supplier. Management have decided closing stock at the end of each month should be as follows: Raw materials: 10% of the next month’s usage Finished goods: 10% of the next month’s sales. Overheads Fixed overheads are estimated at £5,000 per month and are paid in the month they were incurred. £1,500 of this amount relates to depreciation. Insurance of £12,500 is due to be paid in April. Capital Expenditure April: Computer £148,000 May: Delivery van £280,000 June: Additional Delivery van £230,000 Corporation Tax of £35,900 is due to be paid in May The opening bank balance is £43,500 overdrawn.   Q) Recommend to the management of Furniture Island at least three ways of improving their cash position.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Furniture Island manufactures customized dining tables and is
in the process of preparing its budgets for the next quarter (April,
May and June). To date the following budgeted information has
been compiled for one of its popular products ‘Mode’:
Mode
Budgeted sales (units)
April 3,000
May 5,500
June 3,500
July 4,000
Budgeted selling price per unit: £80
80% of sales are on credit. Credit terms are strictly 30 days. 1%
of all sales will result in bad debt. Trade receivables outstanding
on 31st March were £65,000 (which are all collectible in April).

Material X (kilogrammes) 3 kg
Material planner has provided the following information:
Material X Mode
Opening inventory
(April)
1,000 kg 1,200 units
Closing inventory
(June)
1,800 kg x
Purchase price (per
kilogramme)
£2.50 x
[ACC2003/LAC2003]
[Page 9 of 10]
All purchases are paid in the same month to the supplier.
Management have decided closing stock at the end of each
month should be as follows:
Raw materials: 10% of the next month’s usage
Finished goods: 10% of the next month’s sales.
Overheads
Fixed overheads are estimated at £5,000 per month and are
paid in the month they were incurred. £1,500 of this amount
relates to depreciation.
Insurance of £12,500 is due to be paid in April.
Capital Expenditure
April: Computer £148,000
May: Delivery van £280,000
June: Additional Delivery van £230,000
Corporation Tax of £35,900 is due to be paid in May
The opening bank balance is £43,500 overdrawn.

 

Q) Recommend to the management of Furniture Island at least
three ways of improving their cash position.

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