UM Berhad has projected sales for the first six months of 2020 as follows: Month RM January 100,000 February 120,000 March 150,000 April 300,000 May 275,000 June 200,000 Of the firm’s sales, 50% is collected in the month of sale, 25% one month after sales and the remaining 25% two months after sales. UMCCED Berhad purchases raw materials equal to 70% of sales and it makes its purchases one month in advance of sales. The supplier is paid one month after the purchases. The firm incurs and pays a monthly rent expense of RM3,000. General and administrative expenses of RM20,000 are recognised and are paid monthly. Tax prepayments of RM22,000 are made each quarter beginning in March. The firm’s ending cash balance as at 28 February 2020 was RM30,000. Required: Prepare a monthly cash budget for March until May 2020.
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.
UM Berhad has projected sales for the first six months of 2020 as follows:
|
Month |
RM |
|
January |
100,000 |
|
February |
120,000 |
|
March |
150,000 |
|
April |
300,000 |
|
May |
275,000 |
|
June |
200,000 |
- Of the firm’s sales, 50% is collected in the month of sale, 25% one month after sales and the remaining 25% two months after sales.
- UMCCED Berhad purchases raw materials equal to 70% of sales and it makes its purchases one month in advance of sales. The supplier is paid one month after the purchases.
- The firm incurs and pays a monthly rent expense of RM3,000.
- General and administrative expenses of RM20,000 are recognised and are paid monthly.
- Tax prepayments of RM22,000 are made each quarter beginning in March.
- The firm’s ending cash balance as at 28 February 2020 was RM30,000.
Required:
Prepare a monthly
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