Orange Company has sales of RM50,000 in March and RM60,000 in April. Forecast sales for May, June, and July are RM70,000, RM80,000, and RM100,000, respectively. The firm has a cash balance of RM5,000 on 1 May and wishes to maintain a minimum cash balance of RM5,000. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. • The firm makes 20% of sales for cash, 60% are collected in the next month, and the remaining 20% are collected in the second month following sale • The firm receives other income of RM2,000 per month • The firm’s actual or expected purchases, all made for cash, are RM50,000, RM70,000, and RM80,000 for the months of May through July, respectively • Rent is RM3,000 per month • Wages and salaries are 10% of the previous month’s sales • Cash dividends of RM3,000 will be paid in June • Payment of principal and interest of RM4,000 is due in June • A cash purchase of equipment costing RM6,000 is scheduled in July • Taxes of RM6,000 are due in June
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.
Orange Company has sales of RM50,000 in March and RM60,000 in April.
RM100,000, respectively. The firm has a cash balance of RM5,000 on 1 May
and wishes to maintain a minimum cash balance of RM5,000.
Given the following data, prepare and interpret a cash budget for the months of May, June, and July.
• The firm makes 20% of sales for cash, 60% are collected in the next
month, and the remaining 20% are collected in the second month
following sale
• The firm receives other income of RM2,000 per month
• The firm’s actual or expected purchases, all made for cash, are
RM50,000, RM70,000, and RM80,000 for the months of May through
July, respectively
• Rent is RM3,000 per month
• Wages and salaries are 10% of the previous month’s sales
• Cash dividends of RM3,000 will be paid in June
• Payment of principal and interest of RM4,000 is due in June
• A cash purchase of equipment costing RM6,000 is scheduled in July
• Taxes of RM6,000 are due in June
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