INFORMATION The following budgeted information relates to Oscar Limited that will commence business on 01 July 2023: 1. An amount of R800 000 is expected to be banked on 01 July 2023 from the sale of ordinary shares to the public. 2. New machinery and equipment will be purchased on 02 July 2023 for R400 000. A deposit of 25% will be paid immediately and the balance plus finance charges of R60 000 will be paid in five equal monthly instalments commencing August 2023. 3. The number of units of the only product that is expected to be sold and produced each month are as follows: Month July August September Sales 6 800 13 000 16 000 Production 8000 15 000 17 000 4. The selling price of the product is R110 per unit. Cash sales are expected to comprise 60% of the total sales. The balance of the sales will be on credit. Forty percent (40%) of the cash sales is subject to a 10% cash discount. Thirty percent (30%) of the credit sales is expected to be collected in the month of the sale. The balance is expected to be received in the month after the sale. 5. Variable manufacturing costs per unit are estimated as follows: Direct materials Direct labour Manufacturing overheads R30 R18 R14 6. Direct materials will be purchased for the production requirements of each month. Twenty percent (20%) of the purchases is expected to be for cash and the balance will be paid two months after the purchase. Direct workers will have their salaries paid on the last working day of each month. 7. 8. Payment for the variable manufacturing overheads will be delayed by one month. 9. Fixed overheads are expected to amount to R300 000 per month, excluding depreciation of R5 000 per month. Fixed overheads will be paid in the month in which they are incurred.
INFORMATION The following budgeted information relates to Oscar Limited that will commence business on 01 July 2023: 1. An amount of R800 000 is expected to be banked on 01 July 2023 from the sale of ordinary shares to the public. 2. New machinery and equipment will be purchased on 02 July 2023 for R400 000. A deposit of 25% will be paid immediately and the balance plus finance charges of R60 000 will be paid in five equal monthly instalments commencing August 2023. 3. The number of units of the only product that is expected to be sold and produced each month are as follows: Month July August September Sales 6 800 13 000 16 000 Production 8000 15 000 17 000 4. The selling price of the product is R110 per unit. Cash sales are expected to comprise 60% of the total sales. The balance of the sales will be on credit. Forty percent (40%) of the cash sales is subject to a 10% cash discount. Thirty percent (30%) of the credit sales is expected to be collected in the month of the sale. The balance is expected to be received in the month after the sale. 5. Variable manufacturing costs per unit are estimated as follows: Direct materials Direct labour Manufacturing overheads R30 R18 R14 6. Direct materials will be purchased for the production requirements of each month. Twenty percent (20%) of the purchases is expected to be for cash and the balance will be paid two months after the purchase. Direct workers will have their salaries paid on the last working day of each month. 7. 8. Payment for the variable manufacturing overheads will be delayed by one month. 9. Fixed overheads are expected to amount to R300 000 per month, excluding depreciation of R5 000 per month. Fixed overheads will be paid in the month in which they are incurred.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Question
prepare the following for the first three months of operations for July, August, and September 2023
Debtors Collection Schedule
Cash Budget
Transcribed Image Text:INFORMATION
The following budgeted information relates to Oscar Limited that will commence business on 01 July 2023:
1. An amount of R800 000 is expected to be banked on 01 July 2023 from the sale of ordinary shares to
the public.
New machinery and equipment will be purchased on 02 July 2023 for R400 000. A deposit of 25% will
be paid immediately and the balance plus finance charges of R60 000 will be paid in five equal monthly
instalments commencing August 2023.
The number of units of the only product that is expected to be sold and produced each month are as
follows:
Month
2.
3.
4.
6.
July
August
September
The selling price of the product is R110 per unit. Cash sales are expected to comprise 60% of the total
sales. The balance of the sales will be on credit. Forty percent (40%) of the cash sales is subject to a
10% cash discount. Thirty percent (30%) of the credit sales is expected to be collected in the month of
the sale. The balance is expected to be received in the month after the sale.
5. Variable manufacturing costs per unit are estimated as follows:
Direct materials
Direct labour
Manufacturing overheads
7.
8.
9.
Sales
6 800
13 000
16 000
Production
8 000
15 000
17 000
R30
R18
R14
Direct materials will be purchased for the production requirements of each month. Twenty percent (20%)
of the purchases is expected to be for cash and the balance will be paid two months after the purchase.
Direct workers will have their salaries paid on the last working day of each month.
Payment for the variable manufacturing overheads will be delayed by one month.
Fixed overheads are expected to amount to R300 000 per month, excluding depreciation of R5 000 per
month. Fixed overheads will be paid in the month in which they are incurred.
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