Hancock Ltd which carries no month end inventory, has produced the following budgeted Statements of Profit or Loss. July August September October Sales 10,000 12,000 8,000 9,000 Purchases 4,000 4,800 3,200 3,600 Gross profit 6,000 7,200 4,800 5,400 Operating costs 4,000 4,000 4,000 4,000 Net profit 2,000 3,200 800 1,400 If the cash balance on 1st September is £3,000 and assuming that all customers take one month’s credit, that Hancock Ltd takes two months credit on purchases and that operating costs are paid immediately, what will be the expected cash balance at the end of October? £14,200 £6,200 £7,200 £8,200
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.
Hancock Ltd which carries no month end inventory, has produced the following budgeted Statements of Profit or Loss.
|
|
July |
August |
September |
October |
|
Sales |
10,000 |
12,000 |
8,000 |
9,000 |
|
Purchases |
4,000 |
4,800 |
3,200 |
3,600 |
|
Gross profit |
6,000 |
7,200 |
4,800 |
5,400 |
|
Operating costs |
4,000 |
4,000 |
4,000 |
4,000 |
|
Net profit |
2,000 |
3,200 |
800 |
1,400 |
If the cash balance on 1st September is £3,000 and assuming that all customers take one month’s credit, that Hancock Ltd takes two months credit on purchases and that operating costs are paid immediately, what will be the expected cash balance at the end of October?
- £14,200
- £6,200
- £7,200
- £8,200
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