ROBENS Ltd manufactures and sells an electrical component. The company have had a good first year's...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
ROBENS Ltd manufactures and sells an electrical component. The company have had a good first year's trading although they have struggled to manage cash flows because of initial set up costs incurred. The bank balance at the start of Year 2 is projected to be an overdraft of £85,000 and in preparation for a meeting with the account manager you have gathered the following budgetary information :- . The current sales price is currently €/£ 5.50 per unit and this is expected to increase to €/£6.00 per unit at the start of Quarter 2. Sales are projected for each quarter as follows: Year 1 Quarter 4 Year 2 Quarter 1 50,000 units 50,000 units Quarter 2 40,000 units Quarter 3 30,000 units Quarter 4 70,000 units • All sales are on credit and debts are settled in the quarter following sale. Irrecoverable debts of 5% of total revenue are anticipated. • The company normally holds a closing inventory of 20,000 units at the end of each quarter. • The electrical components are produced in batches of 2,000. Each batch requires 200 direct labour hours and 800 kg of raw materials. • Direct labour is projected at a rate of €/£16.00 per hour for Quarter 1 and at €/ 16.50 thereafter. • Raw materials cost €/£5 per kg and are expected to increase by 5% with effect from Quarter 3. The company has agreed an average of 90 days credit with its main suppliers. General overheads are projected to be €/£25,000 per month Requirement (a) Prepare a cash budget for ROBENS Ltd for Year 2, providing quarterly balances.14 marks (b) Prepare a report setting out: - the benefits of good budgetary control; ROBENS Ltd manufactures and sells an electrical component. The company have had a good first year's trading although they have struggled to manage cash flows because of initial set up costs incurred. The bank balance at the start of Year 2 is projected to be an overdraft of £85,000 and in preparation for a meeting with the account manager you have gathered the following budgetary information :- . The current sales price is currently €/£ 5.50 per unit and this is expected to increase to €/£6.00 per unit at the start of Quarter 2. Sales are projected for each quarter as follows: Year 1 Quarter 4 Year 2 Quarter 1 50,000 units 50,000 units Quarter 2 40,000 units Quarter 3 30,000 units Quarter 4 70,000 units • All sales are on credit and debts are settled in the quarter following sale. Irrecoverable debts of 5% of total revenue are anticipated. • The company normally holds a closing inventory of 20,000 units at the end of each quarter. • The electrical components are produced in batches of 2,000. Each batch requires 200 direct labour hours and 800 kg of raw materials. • Direct labour is projected at a rate of €/£16.00 per hour for Quarter 1 and at €/ 16.50 thereafter. • Raw materials cost €/£5 per kg and are expected to increase by 5% with effect from Quarter 3. The company has agreed an average of 90 days credit with its main suppliers. General overheads are projected to be €/£25,000 per month Requirement (a) Prepare a cash budget for ROBENS Ltd for Year 2, providing quarterly balances.14 marks (b) Prepare a report setting out: - the benefits of good budgetary control;
Expert Answer:
Answer rating: 100% (QA)
Part a Cash Budget for ROBENS Ltd for Year 2 Heres a quarterly cash budget for ROBENS Ltd for Year 2 Quarter Sales Revenue Collections Payments Net Cash Flow Q1 275000 262500 195000 67500 Q2 240000 24... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
Students also viewed these accounting questions
-
The Alborg Company Ltd manufactures and sells doors and window frames to the building trade. It has been expanding rapidly over the last two years, experiencing an annual growth rate of 25%. The...
-
It is Monday, September 13, 2010. You, a PA, work at Fife & Richardson LLP, a PA firm. Ken Simpson, one of the partners, approaches you mid-morning regarding Brennan & Sons Limited (BSL), a private...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
A small piece of zinc is dissolved in 50.00 mL of 1.035M HCl. At the conclusion of the reaction, the concentration of the 50.00 mL sample is redetermined and found to be 0.812 M HCl. What must have...
-
Use the appropriate information from the data provided below to calculate operating income for the year ended December 31, 2011. Cost of goods sold General and administrative expenses Net cash...
-
What does total comprehensive income represent, and in which financial statement shall it be presented?
-
A lessee is evaluating whether a lease term is a major part of the remaining life of an asset in order to determine the proper lease classification. The lessee leases office space through a lease...
-
Shannon Inc. has been manufacturing its own shades for its table lamps. The company is currently operating at 100% of capacity. Variable manufacturing overhead is charged to production at the rate of...
-
Suppose your friend Sarah deposits an amount of $19,400 today in a savings account that offers 5.20% annual interest compounded semi-annually. How many years would it take to quadruple her amount? a....
-
A manufacturer of prefabricated homes has decided to subcontract four components of the homes. Several companies are interested in receiving this business, but none can handle more than one...
-
Posttraumatic Growth To prepare for this discussion, review Riverbend City: Grief and Family Systems . After viewing the Riverbend City media piece, read the scenario below. Assume the role of a life...
-
Should Gillham try to improve pay levels? Why or why not and in what ways (e.g., indirect/non-financial components)
-
You bought a car. You paid $20,000 as an initial payment. At the end of the third year, you paid another payment of $2,000. The remaining amount of car's price is to be paid at the end of 10 year....
-
10. Horace uses the cash basis to account for revenue and expenses in his business. He has the following business revenue and expenses during the year: Gross receipts Business expenses Customer...
-
Compile a list of international HR mistakes has made so far. How would you have gone about hiring a European sales manager? Why?
-
During the current fiscal year, Jeremiah Corp. signed a long-term non-cancellable purchase commitment with its primary supplier. Jeremiah agreed to purchase $2,580,000 of raw materials during the...
-
The cost of common equity is based on the rate of return that investors require on the company's common stock. New common equity is raised in two ways: (1) by retaining some of the current year's...
-
It is possible to investigate the thermo chemical properties of hydrocarbons with molecular modeling methods. (a) Use electronic structure software to predict cHo values for the alkanes methane...
-
The concept of accounting quality has several dimensions, but two characteristics often dominate: the accounting information should be a fair representation of performance for the reporting period,...
-
Exhibit 4.22 presents selected operating data for three retailers for a recent year. Macy??s operates several department store chains selling consumer products such as brand-name clothing, china,...
-
In Integrative Case 10.1, we projected financial statements for Walmart Stores, Inc. (Walmart), for Years +1 through +5. In this portion of the Walmart Integrative Case, we use the projected...
-
Using the Internet, write a paper about Ber- nard Madoff's ponzi scheme. Include Shawn Merriman and Andrew Hamilton Williams, Jr. in your discussion.
-
Search for the latest about Robert Allen Stan- fords' alleged ponzi scheme.
-
From the following selected balances of Filo plc as at 31 March 2005 draw up (i) a detailed trading and profit and loss account for internal use, and (i) a profit and loss account for publication....
Study smarter with the SolutionInn App