Questions - Budgeting

7/30/2019 Questions - Budgeting

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Budgeting Practice questions

Question 1

Amar Products Ltd has been in business for several years. They are preparing their budget for the four months starting on 1 January 2007.

Estimated sales are:

Sales

RM

November 15,000

December 18,000

January 12,000

February 13,000

March 15,000

April 14,000

May 16,000

• Purchases are made one month before sale and cost 45% of the sales value.

They are paid for in cash.

• All sales are on credit. It is expected that 35% will pay one month after the sale

and 65% two months after the sale.

• Salaries of RM6,500 will be paid each month;

• Gas and electricity of RM400 per month is payable quarterly on the last day of

February, May, August and November of each year, in respect of the threemonths ending on that day.

• Rent is due every quarter in advance in January, April, July and October. Rent for

the year ended 31 March 2006 is RM1,800 per quarter. This will increase toRM2,100 per quarter for the year starting in April 2006

• Interest on investments of RM2,000 will be received in March.

• Loan interest of RM5,000 will be paid in January

•

On I January Amar Products Ltd expect to have RM2,000 in the bank

Required

Prepare a cash budget, month-by-month, for the period 1 January to 30 April. Assume that overdraft facilities will be available, if needed.




Question 2Dermot Distribution has been in business for several years. They are preparing their budget for the four months starting on 1 December 2006.

Sales for October 2006 were RM65,000 and for November 2006 are expected to beRM75,000.

Forecast sales for the following four months are:

December 2006 RM 70,000January 2007 RM 80,000February 2007 RM 90,000March 2007 RM 75,000

All the sales are on credit terms. On average, 40% is received in the month after thesale is made and the remaining 60% is received two months after the sale.

Goods are bought within the month of sale and cost 55% of the sales value.Suppliers are paid one month after the goods are received.

General expenses of RM36,000 are payable each month. Included in generalexpenses is an amount of depreciation amounting to RM6,000.

The company intends to purchase a fixed asset in March for RM12,000

Gas and electricity of RM700 per month is payable on the last day of March, June,

September and December.

Interest of RM5,000 per quarter is payable every quarter in advance in February,May, August and November.

Rent of RM4,000 will be received in December.

The bank balance on 30 November is expected to be RM5,000

Required

Prepare a cash budget, month-by-month, for the period 1 December to 31 March. Assume that overdraft facilities will be available, if needed.




Question 3

Ephraim Emporium Ltd is preparing its budget for the four months starting on 1December 2006.

They expect to make the following sales:November 2006 £ 75,000December 2006 £ 100,000January 2007 £ 50,000February 2007 £ 60,000March 2007 £ 55,000 April 2007 £ 65,000

40% of sales are for cash. The remainder are expected to pay in the month after thesale.

Goods are bought one month prior to sale and are paid for 2 months later. Purchases

cost 70% of the sales value.

Rent of £4,000 a quarter is payable in advance in March, June, September andDecember.

Gas and electricity of £400 per month is payable quarterly in February, May, Augustand November.

General expenses of £17,000 are payable each month.

The company will pay a dividend of £6,000 in March.

Interest of £4,000 will be received in December.

The bank balance on 30 November is expected to be £1,000

Required

Prepare a cash budget, month-by-month, for the period 1 December to 31 March. Assume that overdraft facilities will be available, if needed.

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Questions - Budgeting