Prepare a cash budget per month for the third quarter
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.
Bellmore Limited is ready to begin its third quarter in which peak sales occur and will have a cash opening balance of R22 250 on 1 July.
Actual sales for the last two months and budgeted sales for the quarter are as follows;
| May (actual) | R125 000 | |
| June (actual) | R150 000 | |
| July (actual) | R200 000 | |
| August (budgeted) | R300 000 | |
| September (budgeted) | R160 000 |
Past experience shows the following:
- 25% of a month’s sales collected in the month of sale
- 70% in the month following the month of sale
- 3% in the second month following the month of sale
- The remainder is irrecoverable
The budgeted material purchases and expenses for the third quarter are as follows:
|
|
July |
August |
September |
|
|
R |
R |
R |
|
Material purchases |
170 000 |
175 000 |
87 500 |
|
Salaries and wages |
22 500 |
20 000 |
20 000 |
|
Advertising |
45 000 |
35 000 |
40 000 |
|
Rent paid |
4 500 |
4 500 |
4 500 |
|
|
5 000 |
5 000 |
5 000 |
Material purchases are paid in full in the month following the month of purchase. Accounts payable for material purchases on the 30 June amounts to R90 000. Equipment costing R8 000 was purchased for cash in July.
REQUIRED:
Prepare a
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