Question 3 The following information is budgeted for Aracker Sdn Bhd (ASB) for second quarter next year: April May June Sales RM110,000 RM130,000 RM180,000 Purchase of materials RM85,000 RM92,000 RM105,000 Administration expenses RM50,000 RM40,000 RM35,000 Fixed overhead RM60,000 RM60,000 RM60,000 Direct labour cost RM55,000 RM37000 RM45,000 Variable overhead RM25,000 RM15,000 RM15,000 Proceeds-sales of securities RM250,000 RM150,000 RM300,000 All sales at ASB are on credit. ASB expects that 40% are collected in the month of sales, 60% in the month following the sale. ASB purchase all material on credit. 80% of purchases are paid for in the month of purchase, the remaining 20% are paid for in the following month. The purchase of material for the month of March is RM90,000. Fixed overhead include depreciation of RM10,000. Direct labor cost, variable overhead and administration expenses are paid within the month they are incurred. Opening cash balance in April is RM50,000. The company wishes to maintain a minimum cash balance of RM100,000 at the end of each month. The company borrows money from the bank at 12% interest if necessary to maintain the minimum cash balance. Assume that borrowed money in this case is for two months. Required: Prepare a cash budget for the months of April, May and June.

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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Question 3 The following information is budgeted for Aracker Sdn Bhd (ASB) for second quarter next year: April May June Sales RM110,000 RM130,000 RM180,000 Purchase of materials RM85,000 RM92,000 RM105,000 Administration expenses RM50,000 RM40,000 RM35,000 Fixed overhead RM60,000 RM60,000 RM60,000 Direct labour cost RM55,000 RM37000 RM45,000 Variable overhead RM25,000 RM15,000 RM15,000 Proceeds-sales of securities RM250,000 RM150,000 RM300,000 All sales at ASB are on credit. ASB expects that 40% are collected in the month of sales, 60% in the month following the sale. ASB purchase all material on credit. 80% of purchases are paid for in the month of purchase, the remaining 20% are paid for in the following month. The purchase of material for the month of March is RM90,000. Fixed overhead include depreciation of RM10,000. Direct labor cost, variable overhead and administration expenses are paid within the month they are incurred. Opening cash balance in April is RM50,000. The company wishes to maintain a minimum cash balance of RM100,000 at the end of each month. The company borrows money from the bank at 12% interest if necessary to maintain the minimum cash balance. Assume that borrowed money in this case is for two months. Required: Prepare a cash budget for the months of April, May and June.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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