Pierce Ltd. specializes in the manufacture of dry cider. The one litre bottle sells for GH(13.00 each. with 25% of sales on cash terms and 75% on one month's credit. The budget shows the following sales volumes. Month Litres August 400.000 September 340.000 October 300.000 November 260.000 December 320.000 January 250.000 The company’s police is for opening inventory of cider to equal one-fifth of each month's sales, but the inventory of cider on 1 September was actually 80.000 litres, For inventories of apples, the policy is for opening inventory to equal 50% of each month's usage. On 1 September, the inventory of apples was actually 2.200 tonnes. On average. 15 kilogrammes of apples are needed to produce l litre of cider 11 tonne= l.000 kg). The cost price of apples is GHc50 tonne in September and October but GH l50 tonne in September and October but GH 150 tonne in November, and December as they have to be imported. Direct depreciation). Payment for apples is made two months after purchase but all other expenses are paid for one month after being incurred. Required. 1. For the months of September. October. November and for the quarter as a whole, prepare the production budget (in litres) and the purchases budget (in tonnes and GH cedis) 2. For November only, prepare the cash budget. (Assume the bank balance on 1 November, is GH 495.900 overdrawn.) 3. Explain THREE strategies a company can use to manage cash shortage
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.
Pierce Ltd. specializes in the manufacture of dry cider. The one litre bottle sells for GH(13.00 each. with 25% of sales on cash terms and 75% on one month's credit. The budget shows the following sales volumes.
|
Month |
Litres |
|
August |
400.000 |
|
September |
340.000 |
|
October |
300.000 |
|
November |
260.000 |
|
December |
320.000 |
|
January |
250.000 |
The company’s police is for opening inventory of cider to equal one-fifth of each month's sales, but the inventory of cider on 1 September was actually 80.000 litres, For inventories of apples, the policy is for opening inventory to equal 50% of each month's usage. On 1 September, the inventory of apples was actually 2.200 tonnes.
On average. 15 kilogrammes of apples are needed to produce l litre of cider 11 tonne= l.000 kg). The cost price of apples is GHc50 tonne in September and October but GH l50 tonne in September and October but GH 150 tonne in November, and December as they have to be imported. Direct depreciation). Payment for apples is made two months after purchase but all other expenses are paid for one month after being incurred.
Required.
1. For the months of September. October. November and for the quarter as a whole, prepare the production budget (in litres) and the purchases budget (in tonnes and GH cedis)
2. For November only, prepare the
3. Explain THREE strategies a company can use to manage cash shortage.
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