FG is preparing its cash budgets for January, February and March. Budgeted data are as follows: 

The selling price per unit is £200. The purchase price per kg of raw material is £25. Each unit of finished product requires 2 kg of raw materials which are purchased on credit in the month before they are used in production. Suppliers of raw materials are paid one month after purchase. 

All sales are on credit. 80% of customers, by sales value, pay one month after sale and the remainder pay two months after sale. 

The direct labour cost, variable overheads and fixed overheads are paid in the month in which they are incurred. 

Machinery costing £100,000 will be delivered in February and paid for in March. 

Depreciation, including that on the new machinery, is as follows: 

Machinery and equipment .....................................................................................  £3500 per month 

Motor vehicles ...........................................................................................................  £800 per month 

The opening cash balance at 1 January is estimated to be £15,000. 

Required 

Prepare a cash budget for each of the three months, January, February and March.

Transcribed Image Text:

November December January February March Sales (units) 750 800 800 850 900 Production (units) 800 800 850 900 950 Direct labour and variable £48 000 £48, 000 £51 000 £54 000 £56 000 overheads incurred Fixed overheads incurred £20 000 £20 000 £20 000 £20 000 £20 000 (excluding depreciation)