Use the information given from Arlon Manufacturers to prepare the Cash Budget for each of the first three months of operations (i.e. January, February, and March 2024). Use separate monetary columns for each month.
Use the information given from Arlon Manufacturers to prepare the Cash Budget for each of the first three months of operations (i.e. January, February, and March 2024). Use separate monetary columns for each month.
Use the information given from Arlon Manufacturers to prepare the Cash Budget for each of the first three months of operations (i.e. January, February, and March 2024). Use separate monetary columns for each month.
Use the information given from Arlon Manufacturers to prepare the Cash Budget for each of the first three months of operations (i.e. January, February, and March 2024). Use separate monetary columns for each month.
Transcribed Image Text:The following information relates to Arlon Manufacturers which will commence business on 01 January 2024
with R750 000 cash:
1.
2.
New machinery and equipment will be purchased on 02 January 2024 for R300 000. A deposit of 20%
will be paid immediately. The balance of the debt as well as finance charges of R18 000 will be paid in
12 equal instalments commencing February 2024.
Production will commence on 05 January 2024 and 30% of the sales for February's will be manufactured
in January. Each month thereafter the production will consist of 70% of the current month's sales and
30% of the following month's sales.
3. Estimated sales at R72 per unit are as follows:
4.
January
February
March
April
Units
0
8 500
11 000
10 500
Cash sales are expected to comprise 60% of the total sales. A cash discount of 10% will be granted to
these customers. The balance of the sales will be on credit. Thirty percent (30%) of the amount owing is
expected to be received in the month of the sale and the balance in the month after the sale.
5.
Variable manufacturing costs per unit are estimated as follows:
Direct materials
6.
Direct labour
Overheads
R30
R16
R12
Direct materials will be purchased to meet the production requirements of each month. Sixty percent
(60%) of the purchases is expected to be for cash and the balance on credit. Creditors are expected to
be paid in the month after the purchase.
7.
Direct labour costs are settled monthly.
8. Variable manufacturing overheads will be paid in the month in which they are incurred.
9.
Fixed costs, excluding depreciation of R5 000 per month, are expected to amount to R40 000 per month
and the fixed costs are paid monthly.
Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.
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