Ronstadt Limited’s budget for the four months from January to April includes the following data: 1. Month Sales Materials Wages Overheads $000 $000 $000 $000 January 615 115.0 30 360 February 636 120.0 33 390 March 690 135.0 36 420 April 684 130.0 40 425 2. One-third of sales revenue is received one month after sale and the remainder is received two months after sale. The sales in the previous two months were: November $600 000; December $540 000. 3. One-quarter of purchases of materials are paid for in the month of purchase. The remainder are paid for two months later. Purchases in the previous two months were: November $108 000; December $106 000. 4. Two-thirds of the wages are paid in the month in which they are earned, and the balance is paid in the following month. The wages for the previous December amounted to $30 000. 5. One-half of the overhead expenditure is paid in the month in which it is incurred, and the balance is paid in the following month. The overheads for the previous December were $380 000. 6. Old machinery will be sold for $4000 in April. New machinery will be purchased in March for $90 000 but only one-half of the price will be paid in that month. The balance will be paid in August. 7. Ronstadt Limited has an overdraft of $63 000 at the bank at 31 December. REQUIRED: Prepare Ronstadt Limited’s cash budget for each of the four months from January to April.
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.
Ronstadt Limited’s budget for the four months from January to April includes the following data:
1.
Month
Sales
Materials
Wages
$000
$000
$000
$000
January
615
115.0
30
360
February
636
120.0
33
390
March
690
135.0
36
420
April
684
130.0
40
425
2. One-third of sales revenue is received one month after sale and the remainder is received two months after sale. The sales in the previous two months were: November $600 000; December $540 000.
3. One-quarter of purchases of materials are paid for in the month of purchase. The remainder are paid for two months later. Purchases in the previous two months were: November $108 000; December $106 000.
4. Two-thirds of the wages are paid in the month in which they are earned, and the balance is paid in the following month. The wages for the previous December amounted to $30 000.
5. One-half of the overhead expenditure is paid in the month in which it is incurred, and the balance is paid in the following month. The overheads for the previous December were $380 000.
6. Old machinery will be sold for $4000 in April. New machinery will be purchased in March for $90 000 but only one-half of the price will be paid in that month. The balance will be paid in August.
7. Ronstadt Limited has an overdraft of $63 000 at the bank at 31 December.
REQUIRED:
Prepare Ronstadt Limited’s
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