Question6: Company wants to prepare a cash budget for May, June, and July. At the end of every month the cash balance will be Rs. 20,000. Determine whether borrowing will be necessary during the period, and if it is, when and for how much. The following information has been provided: As of April 30, the firm had a balance of Rs. 20,000 in cash. Actual Sales Rs. Forecast Sales Rs. January 50,000 May 70,000 February 50,000 June 80,000 March 60,000 July 100,000 April 60,000 August 100,000 50% of total sales are for cash. The remaining will be collected equally during the following two months. Cost of purchases are 70% of sales, 90% of this cost is paid during the first month after incurrence and the remaining 10% is paid in the following month. Dividend of Rs. 10,000 declared on June will be paid in the month of July. Company plans to sell machinery costing Rs. 10,000 at an expected gain of Rs. 5,000 in June. Purchase plant and machinery in June for Rs. 40,000. Income tax payment of Rs. 1,000 will be made in July.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Question6:
Company wants to prepare a
The following information has been provided:
As of April 30, the firm had a balance of Rs. 20,000 in cash.
|
Actual Sales |
Rs. |
|
Rs. |
|
January |
50,000 |
May |
70,000 |
|
February |
50,000 |
June |
80,000 |
|
March |
60,000 |
July |
100,000 |
|
April |
60,000 |
August |
100,000 |
- 50% of total sales are for cash. The remaining will be collected equally during the following two months.
- Cost of purchases are 70% of sales, 90% of this cost is paid during the first month after incurrence and the remaining 10% is paid in the following month.
- Dividend of Rs. 10,000 declared on June will be paid in the month of July.
- Company plans to sell machinery costing Rs. 10,000 at an expected gain of Rs. 5,000 in June.
- Purchase plant and machinery in June for Rs. 40,000.
- Income tax payment of Rs. 1,000 will be made in July.
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