Newtrend Ltd is a new business which has been formed to buy standad radio units and modity them to the specific needs of customers The business will acquire fixed assets costing $200,000 and stock of 1,000 standard radio unit 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 depreciation is charged for five years. Sales are forecast as follows: Year 2 Quarter 1 8,100 Year 1 Quarter 1 8,100 Quarter 2 8,400 Quarter 3 8,700 Quarter 4 7,800 Modified radio units. 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 $30 Direct Labour $33 Fixed overhead $12 Assumptions 1 Suppliers of old radio units will allow one month’s credit 2. Customers are expected to take two months credit. 3. Wages will be paid as they are incurred in production. 4. Fixed overhead cost will be paid as they are incurred. 5. 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. 6. The stock of old radio units will be held constant at 1,000 units. 7. 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. Produce for each quarter of the first year of operations: A cash budged show all workings.
Newtrend Ltd is a new business which has been formed to buy standad radio units and modity them to the specific needs of customers The business will acquire fixed assets costing $200,000 and stock of 1,000 standard radio unit 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
Assumptions
1 Suppliers of old radio units will allow one month’s credit
2. Customers are expected to take two months credit.
3. Wages will be paid as they are incurred in production.
4. Fixed overhead cost will be paid as they are incurred.
5. 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.
6. The stock of old radio units will be held constant at 1,000 units.
7. 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.
Produce for each quarter of the first year of operations:
A cash budged show all workings.
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