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Q.1 The Brotherhood Company has produced the following information from which a cash budget for the first six months of the year is required. The company makes a single product which sells for K50, 000 and the variable cost of each unit is as follows: Material K26, 000 Labour (wages) K8, 000 Variable overhead K2, 000 Fixed overheads (excluding depreciation) are budgeted at K5, 500, 000 per month payable on the 23rd of each month. Notes a. Sales units for the last two months of the year. November December 1,000 1,200 b. Budgeted sales units for next year. February March January 1,400 1,600 c. Production quantities for the last two months of the year. November December January 1,600 April 2,000 1,800' April 2,600 May 2,200 1,200 1,400 d. Budgeted production units for next year. February 2,000 March 2,400 e. Wages are paid in the month when output is produced. f. Variable overhead is paid 50% in the month when the cost is incurred and 50% the following month. g. Suppliers of materials are paid two months after the material is used in production. ✓h. Customers are expected to pay at the end of the second month following sale. ✓i. A new machine is scheduled for January costing K34, 000, 000; this is to be paid for in February. j. An old machine is to be sold for cash in January for K1, 200, 000. k. The company expects to have a cash balance of K35, 500, 000 on 1 January. Required: a. Prepare a month by month cash budget for the first six months of next year. (15 mharks) b. Comment on the action management might take in the light of the cash budget you have prepared. Scanned by CamScanner May 2,400 June 2,600 June 2,200

Q.1 The Brotherhood Company has produced the following information from which a cash budget for the first six months of the year is required. The company makes a single product which sells for K50, 000 and the variable cost of each unit is as follows: Material K26, 000 Labour (wages) K8, 000 Variable overhead K2, 000 Fixed overheads (excluding depreciation) are budgeted at K5, 500, 000 per month payable on the 23rd of each month. Notes a. Sales units for the last two months of the year. November December 1,000 1,200 b. Budgeted sales units for next year. February March January 1,400 1,600 c. Production quantities for the last two months of the year. November December January 1,600 April 2,000 1,800' April 2,600 May 2,200 1,200 1,400 d. Budgeted production units for next year. February 2,000 March 2,400 e. Wages are paid in the month when output is produced. f. Variable overhead is paid 50% in the month when the cost is incurred and 50% the following month. g. Suppliers of materials are paid two months after the material is used in production. ✓h. Customers are expected to pay at the end of the second month following sale. ✓i. A new machine is scheduled for January costing K34, 000, 000; this is to be paid for in February. j. An old machine is to be sold for cash in January for K1, 200, 000. k. The company expects to have a cash balance of K35, 500, 000 on 1 January. Required: a. Prepare a month by month cash budget for the first six months of next year. (15 mharks) b. Comment on the action management might take in the light of the cash budget you have prepared. Scanned by CamScanner May 2,400 June 2,600 June 2,200

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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19:05 P P 1 V Q.1 The Brotherhood Company has produced the following information from which a cash budget for the first six months of the year is required. The company makes a single product which sells for K50, 000 and the variable cost of each unit is as follows: 1,000 1,200 b. Budgeted sales units for next year. March February 1,600 1,800 "' c. Production quantities for the last two months of the year. November December January 1,400 © 11 .... Material K26, 000 Labour (wages) K8, 000 Variable overhead K2, 000 Fixed overheads (excluding depreciation) are budgeted at K5, 500, 000 per month payable on the 23rd of each month. Notes a. Sales units for the last two months of the year. November December 1,200 1,400 d. Budgeted production units for next year. February 2,000 March 2,400 January 1,600 April 2,000 April 2,600 280 B/s May 2,200 May 2,400 Scanned by CamScanner June 2,200 201 e. Wages are paid in the month when output is produced. f. Variable overhead is paid 50% in the month when the cost is incurred and 50% the following month. June 2,600 ✓g. Suppliers of materials are paid two months after the material is used in production. ✓h. Customers are expected to pay at the end of the second month following sale. ✓i. A new machine is scheduled for January costing K34, 000, 000; this is to be paid for in February. ✓j. An old machine is to be sold for cash in January for K1, 200, 000. k. The company expects to have a cash balance of K35, 500, 000 on 1 January. Required: a. Prepare a month by month cash budget for the first six months of next year. (15 marks) b. Comment on the action management might take in the light of the cash budget you have prepared.
Transcribed Image Text:19:05 P P 1 V Q.1 The Brotherhood Company has produced the following information from which a cash budget for the first six months of the year is required. The company makes a single product which sells for K50, 000 and the variable cost of each unit is as follows: 1,000 1,200 b. Budgeted sales units for next year. March February 1,600 1,800 "' c. Production quantities for the last two months of the year. November December January 1,400 © 11 .... Material K26, 000 Labour (wages) K8, 000 Variable overhead K2, 000 Fixed overheads (excluding depreciation) are budgeted at K5, 500, 000 per month payable on the 23rd of each month. Notes a. Sales units for the last two months of the year. November December 1,200 1,400 d. Budgeted production units for next year. February 2,000 March 2,400 January 1,600 April 2,000 April 2,600 280 B/s May 2,200 May 2,400 Scanned by CamScanner June 2,200 201 e. Wages are paid in the month when output is produced. f. Variable overhead is paid 50% in the month when the cost is incurred and 50% the following month. June 2,600 ✓g. Suppliers of materials are paid two months after the material is used in production. ✓h. Customers are expected to pay at the end of the second month following sale. ✓i. A new machine is scheduled for January costing K34, 000, 000; this is to be paid for in February. ✓j. An old machine is to be sold for cash in January for K1, 200, 000. k. The company expects to have a cash balance of K35, 500, 000 on 1 January. Required: a. Prepare a month by month cash budget for the first six months of next year. (15 marks) b. Comment on the action management might take in the light of the cash budget you have prepared.
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