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 K 50,000 and the variable cost of each unit is as follows: Material K26,000 Labour (wages) K 8,000 Variable overhead K 2, 000 Fixed overheads (excluding depreciation) are budgeted at K5, 500, 000 per month payable on the 23rd of each month. Notes sales Units for the last two months of the year November December 1000 1200 Budgeted Sales Units for next year January February March April May June 1400 1600 1800 2000 2200 2600 Production Quanities for the last two months of the year November December 1200 1400 Budgeted Production Units for Next Year January February March April May June 1600 2000 2400 2600 2400 2200 Wages are paid in the month when output is produced. Variable overhead is paid 50% in the month when the cost is incurred and 50% the following month, Suppliers of materials are paid two months after the material is used in production. Customers are expected to pay at the end of the second mouth following sale. A new machine is scheduled for January costing K 34,000,000: this is to be paid for in February. An old machine is to be sold fog cash in January for K I, 200, 000. The company expects to have a cash balance of K35, 500, 000 on I January. Required: a month by month cash budget for the first six months of next years Comment on the action management might take in the tight of the cash budget you have prepared.
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.
The Brotherhood Company has produced the following information from which a
The company makes a single product which sells for K 50,000 and the variable cost of each unit is as follows:
Material K26,000
Labour (wages) K 8,000
Variable overhead K 2, 000
Fixed
Notes
sales Units for the last two months of the year
November December
1000 1200
Budgeted Sales Units for next year
January February March April May June
1400 1600 1800 2000 2200 2600
Production Quanities for the last two months of the year
November December
1200 1400
Budgeted Production Units for Next Year
January February March April May June
1600 2000 2400 2600 2400 2200
Wages are paid in the month when output is produced.
Variable overhead is paid 50% in the month when the cost is incurred and 50% the following month,
Suppliers of materials are paid two months after the material is used in production.
Customers are expected to pay at the end of the second mouth following sale.
A new machine is scheduled for January costing K 34,000,000: this is to be paid for in February.
An old machine is to be sold fog cash in January for K I, 200, 000.
The company expects to have a cash balance of K35, 500, 000 on I January.
Required:
- a month by month cash budget for the first six months of next years
- Comment on the action management might take in the tight of the cash budget you have prepared.
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
