The directors of Lunar Plc are considering investment in new equipment to increase the firm's flexibility. The finance director has asked you to evaluate how much cash the company will have available at the end of March 2020. You have been provided with the following information: (a) The sales forecast for the period from November 2019 to March 2020: Sales (Unit) Unit price Nov-19 | Dec-19 | Jan-20 | Feb-20 | Mar-20 210 £175 190 240 £205 250 220 £180 £200 £210 (b) 40% of customers pay in the month of sale, the rest pay in the following month. (c) Purchases are 65% of the previous month's sales revenue. All purchases are on credit and are paid for in the month following the purchase. (d) Wages of £8,500 are paid monthly. (e) The sales team earn commission of 3% of monthly sales revenue and this is paid in the month following the sale. (f) Charges for light and heat are £750 per month and are paid every 2 months starting from January 2020. (g) Advertising cost is paid at £2,500 per month. (h) At the end of December 2019 Meridian plc has a bank balance of £46,000. Required: (a) Prepare a cash budget for each month from January 2020 to March 2020.
The directors of Lunar Plc are considering investment in new equipment to increase the firm's flexibility. The finance director has asked you to evaluate how much cash the company will have available at the end of March 2020. You have been provided with the following information: (a) The sales forecast for the period from November 2019 to March 2020: Sales (Unit) Unit price Nov-19 | Dec-19 | Jan-20 | Feb-20 | Mar-20 210 £175 190 240 £205 250 220 £180 £200 £210 (b) 40% of customers pay in the month of sale, the rest pay in the following month. (c) Purchases are 65% of the previous month's sales revenue. All purchases are on credit and are paid for in the month following the purchase. (d) Wages of £8,500 are paid monthly. (e) The sales team earn commission of 3% of monthly sales revenue and this is paid in the month following the sale. (f) Charges for light and heat are £750 per month and are paid every 2 months starting from January 2020. (g) Advertising cost is paid at £2,500 per month. (h) At the end of December 2019 Meridian plc has a bank balance of £46,000. Required: (a) Prepare a cash budget for each month from January 2020 to March 2020.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Concept explainers
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.
Question
Transcribed Image Text:Question 20
The directors of Lunar Plc are considering investment in new equipment to increase
the firm's flexibility. The finance director has asked you to evaluate how much cash
the company will have available at the end of March 2020.
You have been provided with the following information:
(a) The sales forecast for the period from November 2019 to March 2020:
Sales (Unit)
Unit price
Nov-19 Dec-19
250
£180
Jan-20 | Feb-20 | Mar-20
240
£205
210
220
£210
190
£175
£200
(b) 40% of customers pay in the month of sale, the rest pay in the following month.
(c) Purchases are 65% of the previous month's sales revenue. All purchases are on
credit and are paid for in the month following the purchase.
(d) Wages of £8,500 are paid monthly.
(e) The sales team earn commission of 3% of monthly sales revenue and this is paid
in the month following the sale.
(f) Charges for light and heat are £750 per month and are paid every 2 months
starting from January 2020.
(g) Advertising cost is paid at £2,500 per month.
(h) At the end of December 2019 Meridian plc has a bank balance of £46,000.
Required:
(a) Prepare a cash budget for each month from January 2020 to March 2020.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 4 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education