Required: Prepare a cash budget for September and October.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Use the following data and information in order to put together a cash budget for September and October
for Rakgwatha Confectionery.
• Budgeted sales for September are 65 000 cupcakes and 98 000 cupcakes in October. Each
cupcake sells for R3,50.
• On average 60% are cash sales and 40% are sold on account.
• The company expects to collect 75% of credit sales in the month of the sale and 20% in the
month after the sale.
• All necessary raw materials are purchased on account. Purchases are paid 85% in the month
of the purchase and 15% in the following month. Purchases for September are estimated to be
R200 000 and R290 000 in October.
• Monthly expenses include:
o Wages R10 000
o Rent R4 000
o Utilities R3 500
o Insurance R2 500
o Advertising R2 290
• Cash balance on September 1st was R6 000.
• The company has a policy to maintain a minimum cash balance of R5 000. If necessary, the
company will borrow to meet its short-term needs. All borrowing is done at the beginning of the
month and all payments on principal and interest are made at the end of the next month. The
annual interest rate is 7%. The company must borrow in multiples of R1 000.
• August sales were 43 000 cupcakes and raw materials purchased equaled R230 000.
Required:
Prepare a cash budget for September and October.
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